UPS Reduces Amazon Deliveries, Prioritizing Profitability
In a move to enhance long-term profitability, UPS (UPS) announced plans to reduce its volume of Amazon (AMZN) deliveries by over 50% by mid-2026. While this will result in lower volumes, UPS anticipates higher margins.
UPS CFO Brian Dykes emphasized that the move is part of a strategic shift to allocate resources toward areas with greater earning potential. Despite Amazon remaining a long-term partner, UPS will focus on deliveries with multiple pickup locations or cross-country shipments.
UPS's revenue outlook for 2025 is approximately $89 billion, below Wall Street's estimations of $94.9 billion. Analysts have expressed surprise at the pace of the Amazon delivery reduction, which is expected to negatively impact near-term results.
However, UPS's fourth-quarter earnings per share of $2.75 exceeded expectations, as did its US domestic operating margin of 10.1%. Despite these positive financial metrics, investors remain concerned about the weak sales outlook and reduced Amazon volumes.
This announcement adds to a challenging period for UPS investors, who have faced frustrations in recent years.