UPS Cuts Amazon Deliveries, Prioritizes Profitability
UPS (UPS) has announced plans to significantly reduce deliveries for its largest customer, Amazon (AMZN), in a move aimed at enhancing long-term profitability. The company's CFO, Brian Dykes, stated that this strategy aims to optimize assets and resources in areas where higher yields and returns can be driven.
By the second half of 2026, UPS will reduce the volume of Amazon deliveries it handles by over 50%. Dykes acknowledged that this shift will lead to lower volumes in the near term but anticipates higher margins as a result. The portion of business being transitioned out is not lucrative for UPS, and Amazon will remain a long-term partner, albeit with a reduced focus on core deliveries.
In its earnings report, UPS forecast 2025 revenue of approximately $89 billion, below analysts' expectations of $94.9 billion. Despite exceeding earnings per share expectations, the reduced Amazon deliveries have raised concerns among investors.
Analysts have expressed surprise at the pace of the delivery reduction, noting that network adjustments will negatively impact near-term results. While UPS's fourth-quarter earnings exceeded expectations, the focus remains on the weak sales outlook and reduced Amazon volumes.
This announcement marks a significant shift in UPS's business strategy and highlights the company's commitment to profitability optimization.