United Parcel Service’s stock fell more than 15% on Thursday after the firm said that it would reduce deliveries to Amazon, its biggest client, by more than half and provided poor revenue outlook for the year.
In its fourth-quarter financial report, the shipping behemoth stated that it and its biggest client had struck a preliminary agreement to reduce tonnage by more than 50% by the second half of 2026.
UPS also said that it is reorganizing its U.S. network and initiating multi-year efficiency projects, which it estimates would save around $1 billion.
During a call with investors, UPS CEO Carol Tome stated that although Amazon is the company’s biggest client, it is not its most lucrative one. She went on to say that its margin is highly dilutive to domestic business in the United States.
In addition to the fundamental adjustments we have already made, we are implementing business and operational reforms that will advance us toward becoming a more lucrative, flexible, and unique UPS that is expanding in the most advantageous regions of the market, Tome stated in a statement.
In a response, Amazon representative Kelly Nantel informed CNBC that UPS had asked for a volume reduction because of their operating requirements.
In a statement, Nantel stated, “We definitely respect their decision.” To better serve our consumers, we’ll keep working with them and a lot of other carriers.
Prior to UPS’s statement, Amazon stated that it had offered to boost UPS’s volume.
UPS predicted $89 billion in revenue in 2025, a decrease from $91.1 billion in 2024. That is significantly less than the $94.88 billion in revenue that analysts surveyed by LSEG predicted would be generated in 2025.
UPS reported $25.30 billion in revenue for the fourth quarter, less than the $25.42 billion analysts had predicted in an LSEG survey.
UPS, FedEx, and the US Postal Service are just a few of the major carriers that Amazon has long used for deliveries. However, as it seeks greater control over deliveries, it has reduced the quantity of goods shipped by UPS and other carriers in recent years.
Since a 2013 holiday incident that left its goods in the hands of outside carriers, Amazon has quickly expanded its own logistics business. The business currently manages a growing internal network of aircraft, trucks, and ships in addition to thousands of last-mile delivery services that deliver products only for Amazon. According to some estimations, Amazon’s internal logistics operations have gotten to the point where they are on par with or bigger than those of major carriers.
For its part, UPS has implemented more aggressive cost-control strategies, such as serving more lucrative delivery clients. The best segments of the industry that it has leaned more heavily into, according to Tome on the investor call, are health care, small company, international, and business-to-business, or B2B. Temu and Shein, two low-cost retailers that have quickly become well-known in the United States, have contributed heavily to UPS’s volume in recent quarters.
UPS lay off 12,000 workers in January of last year in an effort to save $1 billion.
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