The United States Postal Service (USPS) is forecasting a strong rebound in its parcel delivery business in fiscal year 2026, positioning domestic shipping services as a key revenue engine to offset declines in international mail and other segments.
According to filings submitted to the Postal Regulatory Commission, USPS projects that revenue from shipping and package services will increase by 9.4% year over year, helping lift total agency revenue by an estimated 2.9% in FY2026, which begins on October 1.
1. Domestic Parcel Services Lead Revenue Growth
USPS expects its parcel expansion to be driven primarily by Ground Advantage, a ground-based delivery service designed for cost-conscious consumers, and Parcel Select, which targets high-volume shippers such as businesses and e-commerce platforms.
These services are central to USPS’s strategy of strengthening its domestic delivery portfolio and capturing a larger share of last-mile and integrated first-mile-to-last-mile logistics demand.
2. International Mail Revenue Faces Sharp Decline
While domestic parcels are projected to grow, USPS anticipates a significant contraction in its international mail and parcel business, with revenue expected to fall by 42% in FY2026. Within this category, inbound international services are forecast to decline by 56%.
Although USPS did not specify the causes behind the drop, industry observers note that many international postal operators have reported reduced shipment volumes to the United States following the removal of the de minimis duty exemption under the Trump administration, which previously allowed low-value imports to enter the U.S. duty-free.
3. Shift in Strategy Following FY2025 Performance
The updated outlook reflects a more aggressive focus on parcel delivery compared to FY2025. In the previous fiscal year, USPS parcel revenue grew by just 1%, while overall package volume declined by 5.7%. Despite continued strength in Ground Advantage, decreases in Priority Mail and other parcel products weighed on overall performance.
Following the release of FY2025 results, USPS Postmaster General David Steiner reaffirmed the agency’s commitment to accelerating growth in delivery services, particularly by attracting business customers seeking reliable first-mile and last-mile solutions. USPS is also evaluating pricing adjustments in January as part of efforts to strengthen revenue performance.
4. Workforce Optimization and Cost Management Initiatives
In parallel with its revenue strategy, USPS projects a 1.1% reduction in total employee work hours in FY2026, driven by ongoing efficiency initiatives and workforce optimization. This comes as overall system-wide mail and parcel volumes are expected to decline by 6.6%.
Labor cost reduction remains a long-term priority for the agency. In August, nearly 10,500 USPS employees accepted early retirement offers, underscoring continued efforts to align workforce size with evolving demand patterns.
