UPS announced it would drastically cut package delivery for Amazon in 2026.
In a step aimed at generating greater profitability, United Parcel Service (UPS) announced it would drastically cut package delivery for Amazon, its biggest customer. It’s part of a larger effort at UPS to streamline its operations and focus on more profitable aspects of its business.
UPS to cut Amazon deliveries in half in 2026
UPS has agreed with Amazon to cut the number of packages it delivers for the online retailer by over 50% by the latter half of 2026. This is as UPS aims to lessen the effects of low-margin deliveries on its US domestic segment. Although Amazon generated about 11.8% of UPS’s revenue in 2024, the profit margins on these deliveries have been less beneficial. CEO Carol Tomé repeated, “Amazon is our biggest customer, but it’s not our most profitable customer. Its margin is very dilutive to the US domestic business.”
Financial outlook and cost-saving initiatives
Reacting to this strategic repositioning, UPS has updated its financial projections. It anticipates $89 billion in revenues in 2025, a slight reduction from the $91.1 billion it earned in 2024. To counteract the revenue slowdown, UPS is pursuing multi-year efficiency initiatives that will yield approximately $1 billion in annualized cost savings. These include restructuring its US network and reduced reliance on Amazon volume.
Impact on Amazon and possible delivery delays
As UPS reduces its business with Amazon, the latter will have to rebalance its logistics operations. Amazon has been building its own delivery network, but the cutback in UPS’s services can possibly result in late deliveries to customers, particularly in locations where Amazon’s logistics network is still expanding. This can also lead to Amazon investing more in its delivery networks or partnering with other carriers to continue its commitment to quick and reliable shipping.
Strategic focus on more profitable segments
UPS’s move to lessen its reliance on Amazon aligns with the company’s plan to concentrate on more profitable segments, including healthcare logistics and international shipments.
By reinvesting in these segments, UPS aims to expand its operating margin and continue the growth. Its US domestic package segment adjusted operating margin, according to the company’s estimates, will rise from 7.5% in 2024 to 8.8% in 2025 and further target 12% by the end of 2026.
Other cost-saving initiatives by UPS
In addition to cutting down on Amazon deliveries, UPS is also taking other measures to cut expenses. UPS has in-sourced its SurePost service that handles residential, non-emergency, and low-value packages. UPS will also reorganize its US network under a multi-year initiative intended to lower costs and make deliveries more efficient, with a target of $1 billion in cost savings.
