USPS FY26 Q2 Form 10-Q, Financials & Volumes

The United States Postal Service (USPS) recently released its Form 10-Q for the second quarter of fiscal year 2026, ending March 31, 2026. The report highlights a mix of revenue growth driven by use of full authority pricing and significant volume challenges in core mail categories.

Volume Performance

Overall mail and package volume for the second quarter totaled 25.6 billion pieces, a decrease from 26.5 billion (-3.4%) in the prior year, bringing the year-to-date totals to 53.9 billion pieces, as compared to YTD FY25 of 57.8 billion pieces (-6.7%). All categories experienced a decline; however, performance varied significantly across service categories:

• First-Class Mail: Continued its long-term decline due to migration toward digital communication. Q2 (-6.3%) YTD (-6.2%)
• Marketing Mail: Experienced the smallest of declines. Q2 (-0.9%) YTD (-6.5%)
• Shipping and Packages: While still down, the downward trend has slowed.  Q2 (-1.4%) YTD (-7.3%)

Revenue at a Product Level

Due to the postage increases, revenue was up for all products except for International and Periodicals, the two products that saw the steepest declines. 

Financial Performance

 

For the quarter ended March 31, 2026, the USPS reported a net loss of nearly $2.0 billion, an improvement compared to the nearly $3.3 billion loss reported in the same period of 2025. The narrowing of the USPS net loss for the second quarter of FY2026 was primarily driven by two main factors:

Significant Decrease in Workers’ Compensation Expenses

The single largest contributor to the lower net loss was a substantial reduction in workers’ compensation costs:

• Total Expense Reduction: Workers’ compensation expense fell from $1.41 billion in Q2 2025 to $140 million in Q2 2026. This decrease was largely non-cash and driven by changes in discount rates.   (USPS is required to report workers compensation expenses much differently than private industries, as interest/discount rates fluctuate this works both for and against USPS, this quarter the results showed in the Postal Service’s favor compared to the prior year.)

While the net loss improved, some costs increased and prevented a larger reduction in the loss:

• Retiree Health Benefits: The USPS began accruing “top-up” payments to the Postal Service Retiree Health Benefits Fund (PSRHBF), adding $175 million in expenses for the quarter that did not exist in the prior year.
• Lower Investment Income: Interest and investment income dropped by $83 million compared to Q2 2025

Increase in Operating Revenue

Total operating revenue rose by $463 million (2.3%) year-over-year:

• Full use of pricing authority: Revenue growth was bolstered by price increases across Marketing Mail and First-Class Mail.
• USPS Ground Advantage: Success in this shipping sub-category helped drive higher-value product mix, with Ground Advantage revenue increasing by 19.8%.

As of March 31, 2026, unrestricted liquidity stood at $4.5 billion, all in cash and cash equivalents.

USPS currently has no borrowing capacity as they are at their $15.0 billion total statutory limit.

USPS continues to face systemic imbalances that make their current operating model unsustainable.

To preserve cash, the USPS began suspending bi-weekly normal cost contributions for employees under the Federal Employees Retirement System (FERS) on April 10, 2026, which is expected to save approximately $2.5 billion for the remainder of the year.  This temporary waiver was granted by the Postal Regulatory Commission to allow USPS to use the funds for operational expenses.  The waiver expires in FY 2030.

The following table presents the total retirement benefit expenses accrued but unpaid by USPS as of September 30, 2025, and the fiscal years in which the accruals were recorded: