United Parcel Service (UPS) shares fell 14% after the company announced plans to reduce its Amazon delivery volume by more than half by the second half of 2026. The decision, part of a broader effort to enhance profitability, was disclosed in the company’s fourth-quarter earnings report.
UPS stated it had reached an agreement in principle with Amazon, its largest customer, to significantly cut its shipment volume. CEO Carol Tomé noted that while Amazon is UPS’s largest client, it is not its most profitable one, describing its margins as “very dilutive” to the company’s U.S. domestic business. As part of a strategic shift, UPS is restructuring its U.S. network and implementing multiyear efficiency measures expected to generate $1 billion in savings.
Amazon confirmed that UPS had requested the volume reduction for operational reasons. Before UPS’s announcement, Amazon had offered to increase the number of packages it shipped through UPS. Over the years, Amazon has developed its own logistics network, reducing its reliance on major carriers like UPS, FedEx, and the U.S. Postal Service. Since 2013, the e-commerce giant has expanded its last-mile delivery services and in-house transportation infrastructure, making it one of the largest logistics operators in the market.
UPS also issued a weaker-than-expected revenue outlook for 2025, forecasting $89 billion in revenue, down from $91.1 billion in 2024. This falls short of analysts’ expectations, which had projected revenue of approximately $94.88 billion. In the fourth quarter, UPS reported $25.3 billion in revenue, slightly below market estimates.
As part of its evolving strategy, UPS is prioritizing higher-margin segments, including healthcare logistics, small business deliveries, international shipping, and business-to-business (B2B) transactions. In recent quarters, the company has also benefited from an influx of shipments from rapidly growing budget retailers Temu and Shein, which have expanded significantly in the U.S. market.
To improve efficiency, UPS has undertaken aggressive cost-cutting measures, including laying off 12,000 employees last year to achieve $1 billion in savings. The company remains focused on repositioning itself as a more profitable and agile logistics provider, adapting to the shifting dynamics of the shipping industry while optimizing its business for long-term growth.
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