United Parcel Service, Inc. (NYSE:UPS) reported its fourth-quarter results on Thursday and announced a plan to reduce its Amazon.com, Inc. (NASDAQ:AMZN) package volume by more than 50% by the second half of 2026. The announcement comes as part of a set of strategic initiatives UPS launched to drive approximately $1 billion in savings by reconfiguring its U.S. network.
The Details: UPS executives laid out additional details during the company's earnings call with analysts.
CEO Carol Tome said the shift away from Amazon would benefit the company and its shareholders “because if we take no action, it will likely result in diminishing returns.”
"Amazon is our largest customer but it’s not our most profitable customer," Tome said.
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Amazon made up 11.8% of UPS's total company revenue in fiscal 2024, however, the margin on Amazon packages is "very dilutive" to its U.S. domestic business, the CEO disclosed on the call.
She said the company's contract with Amazon was up this year and UPS needed to reassess the relationship. The result of reduced Amazon volumes will be "an improved customer mix at a significantly higher revenue per piece,” Tome said.
BofA Securities analysts highlighted UPS’s margin outlook points to an increase of 120 basis points to 8.8% in 2025 with the reduction in Amazon volume. The firm reiterated its Buy rating on UPS shares but lowered the price from $150 to $133.
According to a report from Supply Chain Dive, Amazon had offered to increase UPS's volumes, not reduce them.
"Due to their operational needs, UPS requested a reduction in volume and we certainly respect their decision," Amazon spokesperson Kelly Nantel told Supply Chain Dive. "We'll continue to partner with them and many other carriers to serve our customers."
Tome confirmed on the earnings call that the "accelerated glide down" of Amazon volumes was initiated by UPS.
"This was not their ask. This was us. This was UPS taking control of our destiny," the CEO said.
UPS Price Action: After a volatile morning, UPS stock is flat at $114.85 at time of publication Friday, according to data from Benzinga Pro.
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