Will UPS Be Better Off in a Post-Amazon World?
Key Points
United Parcel Service is reducing the number of packages it delivers for Amazon.
The shipping company wants to reduce its daily Amazon deliveries by 2 million from last year.
Healthcare logistics and medium-sized businesses are more profitable for UPS.
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The United States Postal Service (USPS) recently struck a deal with Amazon (NASDAQ: AMZN) to deliver around 1 billion packages annually for the e-commerce giant. This comes close to a year after FedEx also signed a multiyear agreement with Amazon.
The notable company doing just the opposite is United Parcel Service (NYSE: UPS). It's reducing its relationship with Amazon, but is that a smart business move -- or one that will come back to haunt it?
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Amazon has been UPS's largest customer, but also its least profitable one. In 2025, UPS reduced its daily Amazon package deliveries by around 1 million. By the end of June, it wants to have reduced deliveries by 2 million.
These last-mile deliveries for Amazon were low-margin and used more workforce and logistics than they were worth. By removing Amazon from the equation, UPS will be able to focus on higher-margin segments like healthcare logistics and small and medium-sized business customers.
While revenue will likely take a noticeable dip as Amazon volume leaves, UPS is playing the long game. It only expects 2026 revenue to be 1.1% higher than the $88.7 billion it made last year. With the shipper prioritizing margin expansion over revenue growth, it's much better that it maintain the capacity to cater to more profitable customers.
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Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and United Parcel Service. The Motley Fool recommends FedEx. The Motley Fool has a disclosure policy.
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