United Parcel Service Inc. (UPS)’s stock had its biggest fall after a record selloff due to missed revenue and downbeat forecast made investors anxious on how it shall manage after losing 50% of Amazon’s business. UPS share price fell by 14% on Thursday, after it announced an agreement that would cut its delivery business with Amazon.com Inc., by far its largest customer.
UPS explained that the move to cut business with Amazon was a strategic plan to focus on increasing profitability rather than just volume.
UPS lowers Amazon’s volume
As per UPS, the shipping giant’s Q4 earnings report it “reached an agreement in principle with its largest customer to lower its volume by more than 50% by the second half of 2026.”
UPS is planning on reconfiguring its U.S. network and wants to launch multiyear efficiency initiatives and by doing so it expects savings of approximately $1 billion.
UPS and Amazon partnership changes
UPS CEO Carol Tome said on a call with investors that Amazon is UPS’ largest customer, but it is not the company’s most profitable customer. “Its margin is very dilutive to the U.S. domestic business,” she added.
“We are making business and operational changes that, along with the foundational changes we’ve already made, will put us further down the path to become a more profitable, agile and differentiated UPS that is growing in the best parts of the market,” Tome said in a statement.
Amazon on UPS cutting deliveries
Kelly Nantel, Amazon spokesperson said that UPS had requested a reduction in volume “due to their operational needs.” “We certainly respect their decision,” Nantel said in a statement. “We’ll continue to partner with them and many other carriers to serve our customers.”
As per Amazon it had even offered to increase the volume of deliveries for UPS, just before the delivery giant’s announcement.
UPS revenue forecast
Considering that Amazon accounted for 11.8% of UPS’s total revenue for the year, which translates to roughly $10.7 billion, it didn’t help that the delivery giant also resumed its pattern of quarterly revenue misses and warned that 2025 revenue would decline, while Wall Street was projecting growth.
UPS forecast for 2025 revenue was of $89 billion, which was down from revenue of $91.1 billion in 2024. This was much below consensus estimates revenue of $94.88 billion for 2025, according to analysts polled by LSEG.
UPS missed on Q4 revenue, reporting $25.30 billion versus $25.42 billion analysts estimated in a survey by LSEG.
Amazon’s control over deliveries
Amazon has never relied on one delivery partner. It had partners like UPS, FedEx and the U.S. Postal Service, amongst others. There was a definite reduction in the number of packages sent through UPS and other carriers in recent years as wants to have more control over deliveries.
Amazon has rapidly built up its own logistics empire. The company now oversees thousands of last-mile delivery companies that deliver packages exclusively for Amazon, as well as a budding in-house network of planes, trucks and ships.
Cost cutting at UPS
As cost saving measure, and to save $1B, it had laid off 12,000 employees in January 2024.
UPS has, for its part, taken more aggressive cost-control measures, including catering to more lucrative customers. As per Tome, health care; small business; international; and business-to-business, or B2B, are “the best parts of the market” that it has leaned into more heavily. Also UPS has benefited from increased volume from retailers like Temu and Shein.
Stock update
UPS’s stock tumbled a record 14.1% closing at a price of $114.90, breaking the previous record of 12.1% on July 23, 2024. The UPS stock had closed at the lowest price since July 13, 2020. It also was S&P 500 index’s SPX biggest decliner on the day. Meanwhile, Amazon’s stock fell 1%, and FedEx Corp. was down by 2.1%.
