The US Postal Service faces a critical moment: Q3 net loss of $3.1 billion, and structural contradictions are amplifying

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Another significant loss in the third quarter of fiscal year 2025: a net loss of $3.1 billion. This figure serves as both a cold, hard look at the quarter’s performance and a reality check on the USPS’s attempts to redeem itself over the past few years through its “Delivering for America” initiative. This article, based on a review of key financial reports, offers a different interpretation from the prevailing media: this isn’t simply a dispute over “price increases and service,” but rather a triple misalignment of institutions, regulations, and grassroots operations that is pushing a public service agency to a critical juncture.

Core data: Losses are not due to revenue decline, but cost squeeze

The USPS reported a net loss of $3.1 billion for the quarter, a further increase from $2.5 billion in the same period last year. Controllable losses, excluding uncontrollable non-cash expenses, were $1.6 billion, also up from $1.1 billion in the same period last year. Meanwhile, total operating revenue remained at approximately $18.8 billion, but total operating expenses soared to approximately $22 billion. In other words, the problem lies more with costs than with “customers not paying.”

The company attributed the increase in expenses this quarter to several factors: non-cash actuarial adjustments related to workers’ compensation (approximately $237 million in the quarter) and increased compensation and benefits expenses (approximately $360 million), both of which were listed as items “out of management’s control.” Meanwhile, investments in information technology, depreciation and amortization, and infrastructure also squeezed profits.

Business differentiation: Parcel revenue increased slightly, but the volume was shrinking

The segmented businesses showed significant divergence: First-Class Mail saw both revenue and volume decline, with volume decreasing by approximately 5.4% this quarter; Marketing Mail revenue decreased slightly, but volume increased slightly; and Shipping & Packages revenue saw a slight year-over-year increase of 0.8%, but the number of packages shipped decreased by 6.5%. This means that while price increases have temporarily alleviated revenue pressure, they cannot mask the long-term risks posed by declining volume. More notably, some major customers are taking back the last mile or switching to competitors, which is weighing on USPS’s prospects for package revenue growth.

Unique Perspective: Triple Misalignment is Amplifying (Institutions – Supervision – Grassroots)

While most reports focus on the debate over whether the Delivering for America (DFA) program should continue or be abandoned, we believe the broader perspective should be on a triple misalignment:

Institutional burdens remain a fundamental issue. Long-term actuarial fluctuations in retirement and health benefit accruals, as well as workers’ compensation, mean that every change in interest or discount rates can push non-cash items onto the income statement, generating significant volatility. These burdens cannot be fully absorbed through short-term operations and require long-term planning at the legislative and institutional levels.

The tug-of-war between regulation and pricing freedom — The USPS board and management are pushing for pricing to alleviate pressure, but the Postal Regulatory Commission (PRC) and legislative bodies are cautious about the frequency and magnitude of price adjustments, potentially limiting the USPS’s short-term room for maneuver. This friction between regulation and self-rescue is complicating reform and amplifying the political costs of cost-shifting.

The tension between grassroots operations and public expectations—in rural and remote areas, the postal service still provides crucial public services (delivery, mailing ballots, pension collection, etc.). However, the cost controls and facility restructuring outlined in the financial report will directly impact service stability and employee workload in these areas. Workers’ compensation and grassroots working conditions were highlighted in this financial report.

The “window period” of personnel and governance: the new director and the vacant board of directors

Earlier this year, new Postmaster General David Steiner took office and publicly expressed support for a modernization strategy, emphasizing the need for “price flexibility and operational optimization” to restore financial strength. At the same time, several vacancies on the board of directors (many of which are pending) have created further uncertainty regarding the governance of strategic adjustments. A governance vacuum or delay would directly impact the pace of reform and the building of public trust.

Social and industry reactions: from unions to industry media

Unions and grassroots organizations reacted strongly to the financial report, raising concerns that cost cuts would dilute mail service (especially in remote areas) and further reduce employee compensation and retirement benefits. Industry media and analysts noted that while DFA has achieved some success in improving on-time delivery rates and launching products like Ground Advantage, it has clearly fallen short of its promised goal of breaking even by 2023. The market is skeptical about whether the USPS can continue to rely solely on price increases and network streamlining to save itself.

What to watch in the coming months

Controllable losses trend: If controllable losses continue to expand (last quarter was $1.6 billion), it means that operational efficiency improvements have not been able to offset inflation and salary increases.

Regulatory Trends: Whether the PRC imposes an annual cap on pricing for market-leading products will directly impact USPS pricing strategies.

Grassroots service indicators: Delivery on-time rates and changes in workers’ compensation cases in remote areas will be key to measuring the “social cost” of reform.

Board and leadership personnel progress: Filling board vacancies and maintaining robust communication with management will impact the legitimacy and execution of reforms.

Conclusion: When “Public Mission” Meets “Market Logic”

The USPS faces a difficult juncture: maintaining the bottom line of public service while navigating market competition and financial constraints. A quarterly loss of $3.1 billion serves as both a warning about the reforms already underway and a clarion call for policymakers to consider more systemic solutions. This 250-year-old public institution needs more than just short-term fixes like price increases or cost cuts; it needs a simultaneous restructuring of regulation, finance, and local services. Otherwise, the familiar blue and white mail trucks and the public functions they carry will ultimately be rewritten by market forces.

Resources and References
: • USPS: Fiscal Year 2025 Third Quarter Financial Results Announcement and Quarterly Report (USPS official press release and 10-Q report). about.usps.com
• Industry Reports and Analysis: Interpretations of financial reports and reform plans from FreightWaves, GovExec, and others. FreightWaves Government Executive
• Regulation and Governance: Publicly available information on the PRC’s policy discussions and USPS Board of Directors personnel situation. Federal News Network, Library of Congress