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In a significant development in the logistics sector, United Parcel Service (UPS) experienced a drastic decline in its stock value, plummeting over 15% on Thursday. This drop followed the company’s announcement of disappointing revenue projections for the upcoming year, along with a decision to significantly reduce delivery volumes for its largest client, Amazon.
UPS disclosed in its fourth-quarter earnings report that it has reached a preliminary agreement with Amazon to cut delivery volumes by more than 50% by the latter half of 2026. This move reflects broader changes within UPS as it seeks to realign its operations.
Alongside the volume reduction, UPS announced the reconfiguration of its U.S. logistics network and the initiation of multiyear efficiency programs aimed at achieving approximately $1 billion in cost reductions. CEO Carol Tome articulated the strategy during an investor call, highlighting that although Amazon is a vital client, it does not contribute significantly to the company’s profit margins. “Its margin is very dilutive to the U.S. domestic business,” she commented.
Tome further elaborated on UPS’s commitment to enhance its operational efficiency, stating, “We are making business and operational changes that, along with the foundational changes we’ve already made, will put us further down the path to become a more profitable, agile and differentiated UPS that is growing in the best parts of the market.”
In response, Amazon spokesperson Kelly Nantel confirmed that UPS had requested the volume reduction to better manage its operational needs. She indicated that Amazon respects this decision and will continue to collaborate with UPS and other logistics providers to meet customer demands. Interestingly, prior to UPS’s announcement, Amazon had offered to increase the volume delivered by UPS.
Financial forecasts for UPS show expected revenue of $89 billion for 2025, a fall from $91.1 billion in 2024 and below the consensus estimate of $94.88 billion based on analyst predictions from LSEG. During the fourth quarter, UPS reported revenues of $25.30 billion, falling short of the anticipated $25.42 billion.
Historically, Amazon has diversified its delivery methods, relying on multiple carriers such as UPS, FedEx, and the U.S. Postal Service. However, the tech giant has been systematically decreasing its dependency on these services, particularly UPS, as it strives for greater control over its delivery operations. This shift intensified after a logistics debacle during the 2013 holiday season, which prompted Amazon to build its extensive logistical infrastructure.
Today, Amazon’s logistics capabilities have expanded significantly, with the company managing a multitude of last-mile delivery partners and establishing an in-house fleet comprising planes, trucks, and ships. Reports suggest that Amazon’s logistics operations may now rival or outpace those of established carriers such as UPS and FedEx.
Meanwhile, UPS is pivoting toward more lucrative delivery segments, with Tome pointing to healthcare, small businesses, international shipping, and business-to-business (B2B) services as areas of focus. The company has experienced a surge in volume from rapidly growing retailers like Temu and Shein in recent quarters. In a strategic move to cut costs, UPS also laid off 12,000 employees last January, aiming to streamline operations and realize $1 billion in savings.
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