AMZN

We have a third of S&P 500 members on deck to report Q3 results this week, including three Mag 7 members – Alphabet GOOGL and Microsoft MSFT on Wednesday and Amazon AMZN on Thursday. By the end of this week, we will have seen Q3 results from more than 50% of S&P 500 members. With results from about a quarter of S&P 500 members already out, we see a continuation of the broad-based strength we've seen in the last few reporting cycles. While the growth pace remains strong, it does not compare favorably with other recent periods, particularly when some of the outlier numbers are excluded. Most importantly, the revisions trend remains positive, with estimates for 2026 Q4 and full-year 2027 continuing to rise. Looking at overall expectations for the quarter, combining the actual results from the 121 S&P 500 members that have reported already with estimates for the still-to-come companies, Q3 earnings are currently expected to increase by +26.2% from the same period last year on +12.2% higher revenues, the 8th straight quarter of double-digit earnings growth for the index. The Tech sector continues to be a major growth contributor, but the momentum is broad-based, with 14 of the 16 Zacks sectors on track to enjoy positive earnings growth and 6 generating double-digit earnings growth in Q3. The quarterly chart below details actual results alongside Q3 2026 growth expectations and forward projections. Image Source: Zacks Investment Research As noted earlier, the revisions trend has been positive, sustaining the favorable trend in place for almost a year. Estimates for Q3 increased after the quarter got underway, and we are seeing a similar trend at play for 2026 Q4 estimates, as the chart below shows. Image Source: Zacks Investment Research This positive revision behavior is not new; it extends a tailwind that has been building for nearly a year. The positive revisions were at first concentrated in Technology and, more recently, Energy following Middle East supply disruptions. However, for 2026 Q4 and also what we saw for Q3, the favorable estimate revisions have broadened significantly, rising across 7 of the 16 Zacks sectors—including Industrials, Basic Materials, Finance, Aerospace and Conglomerates alongside Tech and Energy since the start of October. On the negative side, Q4 estimates have come down since the start of October for 9 sectors, with the major declines at the Transportation, Autos, Consumer Staples, Consumer Discretionary, Construction, and Utilities sectors. It is important to note that estimates for full-year 2027 have also been similarly trending higher, which we show a little later in this note. Sector Focus: Broad-Based Strength This week's reporting line-up, comprising 172 S&P 500 members, is a representative sample of the index as a whole, ranging from the aforementioned Mag 7 members to Coca-Cola, Boeing, Caterpillar, Visa, Eli Lilly, and a host of Finance and other companies. The 6 sectors expected to enjoy double-digit earnings growth in Q3 are Aerospace (up +186.7%), Energy (+128%), Tech (+45.3%), Basic Materials (+32.6%), Transportation (+11.1%), and Industrial Products (+14.4%). Q3 earnings growth for the S&P 500 index drops to +21.6% from +26.2% once the Energy sector's contribution is excluded from the index. Excluding the Tech sector, Q3 earnings growth for the rest of the index drops to +16.1%. For the Mag 7 group, we already have actual results from Meta META and Tesla TSLA, and this week will bring results from Alphabet, Amazon, and Microsoft. The expectation is that Q3 earnings for the Mag 7 will increase by +22.3% on +23.1% revenues, as the chart below shows. Image Source: Zacks Investment Research Excluding the Mag 7 group's contribution, Q3 earnings for the rest of the index would actually improve to +27.6% (from +26.2%). The chart below shows quarterly earnings and revenue growth expectations for the Tech sector as a whole. Image Source: Zacks Investment Research The Q3 earnings and revenue growth rate drops to +23.1% from +45.3% once the substantial contributions from Nvidia NVDA, Micron MU, and Alphabet GOOGL are excluded, as the chart below shows. Image Source: Zacks Investment Research Q3 Earnings Season Scorecard Through Friday, October 23rd, we have seen Q3 results from 121 S&P 500 members, or 24.2% of the index's total membership. Total earnings for these companies are up +31.5% from the same period last year on +12.2% higher revenues, with 80.7% beating EPS estimates and 69.7% beating revenues estimates. The comparison charts below show the earnings and revenue growth rates for these companies compared to other recent periods. Image Source: Zacks Investment Research The very strong earnings and revenue growth pace for this group of 45 S&P 500 members is mostly due to Micron, whose Q3 earnings increased +1075.7% from the year-earlier level. Excluding the Micron contribution, Q3 earnings for the remaining 120 index members that have reported would be up +14%. The chart below shows the Q3 earnings growth pace for the companies that have reported, with and without Micron, across recent periods. Image Source: Zacks Investment Research The comparison charts below show the Q3 EPS and revenue beat percentages for these companies compared to other recent periods. Image Source: Zacks Investment Research For the Finance sector, we now have Q3 results from 55.3% of the sector's market capitalization in the S&P 500 index. Total earnings for these Finance sector companies are up +10% from the same period last year on +8.7% higher revenues, with 80.6% beating EPS estimates and 52.8% beating revenue estimates. The comparison charts below put the Q3 earnings and revenue growth rates in a historical context. Image Source: Zacks Investment Research The comparison charts below show the Q3 EPS and revenue beat percentages in a historical context. Image Source: Zacks Investment Research As you can see above, not only are the growth rates tracking below other recent periods, but Finance sector companies also seem to be struggling to beat consensus EPS and revenue estimates. The Earnings Big Picture The chart below shows the aggregate growth picture for the S&P 500 index on a calendar year basis. Image Source: Zacks Investment Research As we noted earlier, estimates for full-year 2027 are experiencing the same positive and broad-based revisions trend that we noted earlier in the context of 2026 Q4. The chart below shows how aggregate 2027 earnings expectations have evolved since the start of July. Image Source: Zacks Investment Research For a detailed view of the evolving earnings picture, please check out our weekly Earnings Trends report here >>>> Q3 Earnings Season Ramps Up, Outlook for Q4 and Full-Year 2027 Improves Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amazon.com, Inc. (AMZN) : Free Stock Analysis Report Microsoft Corporation (MSFT) : Free Stock Analysis Report Micron Technology, Inc. (MU) : Free Stock Analysis Report NVIDIA Corporation (NVDA) : Free Stock Analysis Report Tesla, Inc. (TSLA) : Free Stock Analysis Report Alphabet Inc. (GOOGL) : Free Stock Analysis Report Meta Platforms, Inc. (META) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Alphabet GOOGL is set to report third-quarter 2026 results on Oct. 28. For third-quarter 2026, the Zacks Consensus Estimate for earnings is pegged at $2.94 per share, up by a penny over the past 30 days, and indicating 2.44% year-over-year growth. The consensus mark for third-quarter revenues is pegged at $111.64 billion, implying growth of 27.63% from the year-ago quarter's reported figure. Alphabet Inc. price-eps-surprise | Alphabet Inc. Quote Alphabet has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in all the trailing four quarters, with the average surprise being 86.65%. Image Source: Zacks Investment Research Let's see how things have shaped up for the upcoming announcement: Alphabet's third-quarter 2026 results are expected to have benefited from accelerating Google Cloud adoption, supported by strong demand for AI infrastructure, enterprise AI solutions and core Google Cloud Platform (GCP) services. In the second quarter of 2026, cloud revenues surged 82% year over year to $24.77 billion, while cloud backlog reached $514 billion, increasing by more than $50 billion sequentially. Cloud revenues are also expected to have benefited from expanding customer relationships, rising consumption and demand for Google's custom Tensor Processing Units (TPUs) systems. Google Search & Other is expected to have remained a key revenue contributor in the third quarter, driven by increasing search activity, healthy advertiser spending and AI-powered advertising improvements. In the second quarter of 2026, Search & Other revenues increased 17% year over year to $63.27 billion, primarily supported by retail and financial services advertisers. AI Overviews and AI Mode have been driving incremental search queries, while AI Max and Performance Max are helping advertisers improve campaign effectiveness. However, GOOGL cautioned that third-quarter growth comparisons would become tougher as Alphabet laps the acceleration in Search performance that began in third-quarter 2025. Alphabet's third-quarter 2026 performance is likely to have benefited from growth in YouTube advertising, supported by direct-response campaigns, brand advertising, Shorts and connected television. YouTube advertising revenues increased 13% year over year to $11.06 billion in the second quarter of 2026, reflecting strength across direct-response and brand campaigns. AI-powered Demand Gen campaigns, creator partnerships and new advertising formats are improving advertisers' ability to reach audiences across YouTube and Shorts. The growing popularity of connected television and increasingly effective shopping experiences are also expected to have supported advertising monetization. Increasing adoption of Gemini across consumer and enterprise applications is expected to have supported Alphabet's third-quarter performance. In the second quarter of 2026, Gemini API usage reached approximately 22 billion tokens per minute, up from more than 16 billion in the preceding quarter. The Gemini application reached 950 million monthly active users, while more than 9 million developers were building with Google's models each month. Strong adoption of Gemini Enterprise, AI development tools and model APIs is creating additional monetization opportunities across Google Cloud, Workspace and other services. However, higher depreciation, energy expenses, data center operating costs and AI-related hiring are expected to have pressured operating margins. GOOGL also anticipated modest near-term margin pressure from using third-party cloud capacity in the third quarter. Alphabet's shares have climbed 3.8% year to date (YTD), underperforming the broader Zacks Computer & Technology sector's return of 18%. Alphabet shares have underperformed peers including Apple AAPL, Amazon AMZN and Microsoft MSFT over the same timeframe. Shares of Apple, Amazon and Microsoft have returned 28%, 8.6% and 7.8%, respectively, YTD. Image Source: Zacks Investment Research GOOGL shares are overvalued, as suggested by Value Score C. Currently, GOOGL is trading at a premium, with a forward 12-month price/sales of 7.38X compared with the broader sector's 5.72X and Amazon's 2.91X. However, Alphabet shares trade at a discount compared with Microsoft's 9.37X and Apple's 9.70X. Image Source: Zacks Investment Research Alphabet's prospects are supported by its integrated AI portfolio spanning custom accelerators, Gemini models, data analytics, cybersecurity and enterprise applications. Google management has highlighted more than 17 product lines generating over $1 billion each in revenue. The company is gaining traction across enterprise AI infrastructure, BigQuery, Gemini Enterprise and Workspace, enabling opportunities to expand customer spending. Alphabet also highlighted that customers using Google's AI products consume 1.8 times as many products as non-AI customers, indicating significant cross-selling potential. Growing demand for AI training and inference represents a major long-term opportunity for Alphabet's infrastructure business. The company's custom TPUs, Axion CPUs and NVIDIA GPU offerings provide customers with multiple computing options. Alphabet is also commercializing TPU systems through cloud subscriptions, direct hardware sales and neocloud partnerships. Increasing enterprise adoption of agentic AI is expected to strengthen Alphabet's long-term growth prospects. Gemini Enterprise enables organizations to build autonomous agents, analyze proprietary data, automate business processes and improve operational efficiency. Alphabet has stated that more than 90% of Fortune 100 companies have been using Gemini Enterprise, and the platform is gaining adoption across financial services, retail, insurance and other industries. Alphabet's third-quarter 2026 performance is expected to have benefited from robust Google Cloud demand, growing AI adoption, sustained Search advertising momentum and improving YouTube monetization. The company's expanding Cloud backlog, growing enterprise customer base and increasing adoption of Gemini-powered solutions are encouraging. Despite a premium valuation, Alphabet's full-stack AI strategy, expanding TPU business, enterprise AI adoption and new advertising opportunities offer plenty of growth opportunities for investors. Alphabet currently has a Zacks Rank #2 (Buy), suggesting that it may be wise to buy the stock ahead of third-quarter earnings. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Alphabet Inc. (GOOGL) : Free Stock Analysis Report Amazon.com, Inc. (AMZN) : Free Stock Analysis Report Apple Inc. (AAPL) : Free Stock Analysis Report Microsoft Corporation (MSFT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Amazon (AMZN) is expected to deliver a year-over-year increase in earnings on higher revenues when it reports results for the quarter ended September 2026. This widely-known consensus outlook gives a good sense of the company's earnings picture, but how the actual results compare to these estimates is a powerful factor that could impact its near-term stock price. The earnings report, which is expected to be released on October 29, might help the stock move higher if these key numbers are better than expectations. On the other hand, if they miss, the stock may move lower. While the sustainability of the immediate price change and future earnings expectations will mostly depend on management's discussion of business conditions on the earnings call, it's worth handicapping the probability of a positive EPS surprise. This online retailer is expected to post quarterly earnings of $2.01 per share in its upcoming report, which represents a year-over-year change of +3.1%. Revenues are expected to be $202.11 billion, up 12.2% from the year-ago quarter. The consensus EPS estimate for the quarter has been revised 0.3% lower over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period. Investors should keep in mind that the direction of estimate revisions by each of the covering analysts may not always get reflected in the aggregate change. Price, Consensus and EPS Surprise Estimate revisions ahead of a company's earnings release offer clues to the business conditions for the period whose results are coming out. This insight is at the core of our proprietary surprise prediction model -- the Zacks Earnings ESP (Expected Surprise Prediction). The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier. Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model's predictive power is significant for positive ESP readings only. A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP. Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell). For Amazon, the Most Accurate Estimate is lower than the Zacks Consensus Estimate, suggesting that analysts have recently become bearish on the company's earnings prospects. This has resulted in an Earnings ESP of -2.11%. On the other hand, the stock currently carries a Zacks Rank of #3. So, this combination makes it difficult to conclusively predict that Amazon will beat the consensus EPS estimate. Analysts often consider to what extent a company has been able to match consensus estimates in the past while calculating their estimates for its future earnings. So, it's worth taking a look at the surprise history for gauging its influence on the upcoming number. For the last reported quarter, it was expected that Amazon would post earnings of $1.83 per share when it actually produced earnings of $1.88, delivering a surprise of +2.73%. Over the last four quarters, the company has beaten consensus EPS estimates two times. An earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss. That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it's worth checking a company's Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported. Amazon doesn't appear a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release. Carvana (CVNA), another stock in the Zacks Internet - Commerce industry, is expected to report earnings per share of $0.47 for the quarter ended September 2026. This estimate points to a year-over-year change of +123.8%. Revenues for the quarter are expected to be $7.63 billion, up 35.2% from the year-ago quarter. The consensus EPS estimate for Carvana has been revised 4.6% lower over the last 30 days to the current level. However, a lower Most Accurate Estimate has resulted in an Earnings ESP of -11.02%. This Earnings ESP, combined with its Zacks Rank #4 (Sell), makes it difficult to conclusively predict that Carvana will beat the consensus EPS estimate. Over the last four quarters, the company surpassed consensus EPS estimates two times. Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amazon.com, Inc. (AMZN) : Free Stock Analysis Report Carvana Co. (CVNA) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

United Parcel Service UPS is scheduled to report its third-quarter 2026 results on Oct. 27, before the market opens. The Zacks Consensus Estimate for the to-be-reported quarter's earnings per share and revenues is pegged at $1.63 and $22.23 billion, respectively. The bottom-line projection indicates a year-over-year decline of 6.3%. The consensus mark for the to-be-reported quarter has remained stable over the past 60 days. The Zacks Consensus Estimate for quarterly revenues implies a year-over-year expansion of 3.8%. Image Source: Zacks Investment Research For 2026, the Zacks Consensus Estimate for UPS' revenues is pegged at $91.71 billion, implying a 3.4% year-over-year uptick. The consensus mark for 2026 EPS is pegged at $7.19, indicating a year-over-year improvement of 0.4%. This package delivery company's earnings beat estimates each of the past four quarters, with the average surprise being 12.4%. United Parcel Service, Inc. price-eps-surprise | United Parcel Service, Inc. Quote Our proven model predicts an earnings beat for UPS for the September quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is exactly the case here. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter. UPS has an Earnings ESP of +0.95% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here. We expect the still-ongoing macro uncertainty due to the Middle East conflict to have dented UPS' performance in the September quarter. The ongoing conflict in the Middle East has resulted in a sharp jump in oil prices. This has been naturally hurting the bottom line of transportation stocks, like UPS. This is because fuel expenses represent a key input cost for a transportation company. UPS' decision to scale back business with Amazon AMZN is expected to have kept third-quarter volumes muted. Management reached an agreement in principle with Amazon to reduce the e-commerce giant's volume by more than 50% by June 2026. CEO Carol Tome noted that Amazon was not the company's most profitable customer. The reduction in volumes is compelling UPS to right-size its network. We expect overall volumes to decline 5.4% year over year in the September quarter. That said, third-quarter results are likely to reflect UPS' efforts toward improving profitability over sheer volume, through its "Better, Not Bigger" strategy. Under the cost-cutting initiatives, UPS has substantially reduced its U.S. operational workforce and closed daily operations at multiple leased and owned buildings. Moreover, UPS has been focusing on increasing automation in sorting and operations and leveraging AI for logistics planning to boost efficiency. The shift in focus toward higher-margin areas such as small and medium-sized businesses or SMBs and healthcare logistics from low-margin volumes (like Amazon) is expected to be reflected in UPS' first-quarter results. Notably, SMBs contributed 34.5% to total U.S. volume in the June quarter, reflecting a 250-basis-point year-over-year improvement. We expect SMBs to have performed strongly in the September quarter as well, boosting results. Shares of UPS have declined marginally year to date ("YTD"), similar to the Zacks Transportation-Air Freight and Cargo industry. Shares of rival FedEx FDX have seen a single-digit (% -wise) rise in the same timeframe. Image Source: Zacks Investment Research On the basis of the forward 12-month Price/Sales (P/S), UPS' shares are trading at a discount compared with the industry average. FedEx is cheaper. UPS and FedEx each currently have a Value Score of B. Image Source: Zacks Investment Research UPS is looking to grow its per-package revenues by gaining more business in segments like healthcare. A few years back, UPS acquired Bomi Group, an industry-leading multinational healthcare logistics provider. Last year, UPS acquired Andlauer Healthcare Group as part of its commitment to offer global specialty capabilities. Because of this strategic shift, UPS did not increase its quarterly dividend this year, keeping it at $6.56 annually. In the event of the company failing to put an end to its struggles through the strategic shift, the high payout ratio may lead to a dividend cut, which would be disastrous for dividend investors. It is worth noting that the company has the brand and the network to continue generating steady cash flows in the long run. This makes UPS a compelling long-term player in the transportation space. However, the near-term headwinds, including the macro uncertainties and volume declines, are hard to ignore. So, all in all, it is worth holding on to UPS stock for now. Betting on the stock ahead of its upcoming results does not seem like a good idea. It is better to wait for management's commentary on volumes and cost-cutting efforts, apart from the updated 2026 guidance, to get more clarity on near-term prospects. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report United Parcel Service, Inc. (UPS) : Free Stock Analysis Report Amazon.com, Inc. (AMZN) : Free Stock Analysis Report FedEx Corporation (FDX) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

The Goldman Sachs Group (NYSE:GS) recently reported its third-quarter results and beat estimates. The stock ranks fifth on our list of the top 10 common stock picks of billionaire Ken Fisher and Jim Cramer. The results were strong, so is the stock a buy after the report? Let's analyze. Goldman has beaten earnings estimates in each of the last four quarters. Management said net revenues were the second highest in the firm's history. Return on common equity was 18.7%. Equities revenue rose 72% from a year earlier, and asset and wealth management revenue rose 10% from the second quarter. Even so, the stock traded flat after the report. Goldman also invests its own money, and its 13F filing earlier this year showed it added to Micron and Amazon in the second quarter. See the full breakdown. Goldman has a steadier earnings base than it used to, so a slow stretch in dealmaking hurts less. Management said on the earnings call that durable revenues have more than doubled since its 2020 investor day and made up about 45% of revenue so far this year. These are revenues such as management fees and financing, which do not swing as much as trading and deal fees. Goldman also keeps a strong position in the work that drives its biggest fees. Carillon Eagle Growth & Income Fund said in its investor letter that Goldman has one of the strongest M&A advisory businesses in the world and that more deals and public offerings lift its results. Check the full letter here. If deal activity keeps recovering, Goldman has a large and growing base of steady income to build on. Goldman's results still depend on capital markets, and those can turn quickly. Trading revenue dipped from the prior quarter in the third quarter. Dealmaking was also uneven across the industry, since JPMorgan and Wells Fargo both reported weaker investment banking in the same season. Growth is also set to slow. Analysts expect earnings per share to grow about 39% in 2026 and only about 4% in 2027. They expect sales growth of about 25% in 2026 and about 1.4% in 2027. After a year like this one, the next year has a hard comparison. Wall Street's consensus rating on the stock is Hold, and a quant score also rates it Hold. Goldman trades at about 12.3 times forward earnings. The typical stock in its sector trades at about 10.8 times, so Goldman carries a premium of about 14%. Goldman's own five-year average is about 12.5 times, so the stock sits about where it usually does. Growth explains why investors pay more than the sector. Analysts expect earnings per share to grow about 39% in 2026. The forward PEG ratio, which divides the P/E by expected growth, is 0.80 against a sector median of 1.03, so Goldman costs less per point of growth than the typical stock in its sector. Next year looks different. Analysts expect earnings growth to slow to about 4% in 2027, and at that pace the stock would look much more expensive on the same measure. While we acknowledge the risk and potential of GS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GS and that has 10,000% upside potential, check out our report about this cheapest AI stock. READ NEXT: 33 Stocks That Should Double in 3 Years and Cathie Wood 2026 Portfolio: 10 Best Stocks to Buy Disclosure: None. Follow Insider Monkey on Google News. Tags:

In the case of United Parcel Service (NYSE: UPS), it's all about adjusted operating profit margin. This key number lies at the heart of the company's transformational strategy, which entails reducing less-profitable Amazon deliveries in favor of higher-margin e-commerce deliveries, particularly in targeted markets such as healthcare and small and medium-sized businesses (SMBs). At the same time, UPS's investments in smart facilities and automation are intended to improve productivity and, ultimately, margins. Everything points to margin expansion, but is it working out like that for UPS right now? Let's find out. Missed AI's "Act 1"? Act 2 Could Be 14x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we're only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue » In the fourth-quarter earnings presentation in January, management forecast full-year revenue of $89.7 billion and an adjusted operating profit margin of 9.6%, implying $8.611 billion in adjusted operating profit. The headline guidance was maintained on the first-quarter earnings call in April. Still, on the second-quarter earnings call, management increased its full-year revenue guidance to $91.2 billion and specifically said that adjusted operating profit would be about $8.65 billion. Superficially, it's an increase in revenue guidance and also an increase over the implied guidance of $8.611 billion I calculated above. However, there are two key considerations for investors, and they matter a lot for the upcoming results of a company with a near-7% dividend yield. First, the new guidance implies an adjusted operating margin of 9.48%, down from the 9.6% initially forecast. Second, it's important to understand the nuance of the guidance change. As previously discussed, due to rising fuel costs, UPS raised fuel surcharges by $1.173 billion in the first half. Bearing in mind that the increase in full-year revenue guidance was $1.5 billion to $91.2 billion, it's reasonable to expect a large chunk of the revenue increase is due to the fuel surcharge. Turning to the difficult question of how much profit UPS is making from the fuel surcharges, its fuel cost and third-party costs increased by $744 million, resulting in a net difference of $429 million -- a figure slightly more than the increase in adjusted operating profit guidance. To be clear, management's position is that the fuel surcharge is intended solely to cover increased fuel costs, and there are associated costs related to fuel disruptions as well. Moreover, CFO Brian Dykes argued that "the net impact to consolidated operating profit dollars was modest" on the second-quarter earnings call. In the absence of knowing exactly what kind of figure "modest" implies, it could be argued that the combination of a positive contribution from fuel surcharges over fuel cost -- something not likely to prove sustainable -- actually implies a significant decrease in adjusted operating profit margin if the impact of fuel is taken out. As noted, this is the year when UPS should start to build on margin improvement, not least because it finished the so-called "glide down" of Amazon deliveries by 50% (volume) from the start of 2025 to the middle of 2026. That's why investors are so focused on margin, particularly the expected adjusted operating profit margin in the U.S. domestic package segment. I've replicated what the Wall Street consensus, according to S&P Global Market Intelligence, is expecting for the segment, and the company's total adjusted operating margins will be below. As is often the case with Wall Street estimates, the full-year U.S. Domestic Package margin guidance mirrors management's 7.5% guidance given on the last earnings call. Adjusted Operating Profit | Q1 2026 | Q2 2026 | Q3 2026 Est | Q4 2026 Est | Full Year 2026 Est U.S. Domestic Package | 4% | 7.96% | 6.98% | 10.56% | 7.53% Total company | 6.24% | 9.21% | 8.92% | 12.65% | 9.4% Data source: S&P Global Market Intelligence. All told, in the absence of management disclosing the exact figure, it's hard to know exactly how much fuel surcharges are adding to the blue chip stock's profitability. However, management has guided to a full-year U.S. Domestic Package adjusted operating profit margin of 7.5%, and the implied total company adjusted operating margin guidance is 9.48%. Any failure to maintain those figures or meet the Wall Street analyst consensus in the table in the third quarter would suggest its margin trajectory isn't quite what most hope for. That said, if UPS beats both expectations, the margin expansion story will support the case for the stock. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. If you'd invested $5,000 then, you'd be sitting on $2,813,887 today.* Now, for the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. It's a key player in the $1.8 trillion space race, and with the stock recently sitting 20% off its highs, the window to get in early is closing fast. Continue » *Stock Advisor returns as of October 21, 2026. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, S&P Global, and United Parcel Service. The Motley Fool has a disclosure policy. 1 Number Every UPS Investor Should Watch in Q3 Earnings was originally published by The Motley Fool