UPS Announces Delivery Reduction for Amazon, Targeting Long-Term Profitability
UPS has announced a significant reduction in deliveries for its largest customer, Amazon. This decision, which will impact more than 50% of UPS's Amazon deliveries by mid-2026, is part of the company's long-term strategy to enhance profitability.
UPS CFO Brian Dykes emphasized the move is intended to "drive higher yields and returns" by focusing on areas where the company can maximize efficiency. Dykes acknowledged that the change will reduce volumes in the near term but anticipates improved margins in the future.
UPS expects revenue of approximately $89 billion in 2025, lower than Wall Street forecasts. Analysts have expressed mixed reactions, expressing surprise at the pace of Amazon delivery reductions but acknowledging the positive impact on the company's margins.
The fourth-quarter earnings report released Thursday exceeded expectations, with earnings per share of $2.75 and a US domestic operating margin of 10.1%. However, investors remain focused on the impact of the Amazon delivery reduction on future sales.
UPS remains committed to its long-standing partnership with Amazon but will focus on deliveries involving multiple pickup locations or cross-country shipments. This move demonstrates UPS's commitment to optimizing its operations and delivering long-term value to shareholders.