UPS Shares Plunge on Plan to Slash Amazon Business By Half
From premium to economy services, cutting into the Atlanta-based company's earnings.
It plans to adjust by shipping fewer, more profitable packages and reducing less profitable deliveries. UPS announced Thursday it reached a deal with Amazon to lower totals by more than 50% by the second half of 2026.
"Amazon is our biggest customer, but it's not the one that earns us the most money," Chief Executive Officer Carol Tomé said to investors in a call.
Amazon has decided to send fewer packages via UPS, despite initially requesting that the courier handle more shipments. "We'll keep working with them and other carriers to serve our customers," said Amazon spokesperson Kelly Nantel in an email statement.
UPS expects its revenue to reach $89 billion in 2025, which is short of the $94.9 billion predicted by analysts on average. In 2024, the company's revenue totaled $91.1 billion, with business with Amazon accounting for 11.8% of that total.
The abrupt speeding up of UPS' business disengagement with Amazon came as a shock, said Daniel Imbro, an analyst at Stephens Inc.
This fits with their strategy of doing better, not just getting bigger," Imbro said in an email. "However, it appears to be a challenge to their earnings performance, given the lack of growth in underlying revenue.
UPS' shares declined by 18% to $109.92 as of 11:13 in New York, the biggest drop during the trading day since October 10, 2008. This came after a 20% decrease in 2024, marking a third consecutive year of declines. Amazon's stock fell 1.8% to $232.71.
Tomé’s Troubled Tenure
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to reduce its dependence on lower profit Amazon volumes.
Tomé told nervous analysts on the call that UPS will soon reveal its outlook for the year 2026.
We'll schedule it for later this year, probably towards the end of the first quarter.
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UPS Chief Financial Officer Brian Dykes stated on the investor conference call that the company will close a maximum of 10% of its facilities, shrink its fleet, and trim the US workforce, though the exact number of job cuts is not specified in line with overhauling its operations to adapt to lower demand.
Belt-Tightening Plans
UPS is also working on a multi-year plan to revamp its network with the goal of saving $1 billion. The expensive contract with the Teamsters union has prompted the company to look for ways to recoup these costs, in part by winning back customers who switched to rival carriers during the tumultuous labor negotiations in 2023.
Targeting nearly $20 billion in revenue from this segment by the year 2026.
The ongoing low demand for parcel shipping is a persistent problem.
It's tough to understand the actual impact on efficiency without seeing a big enough sample size, because it's like being stuck in a never-ending waiting game," Conor Cunningham, an analyst at Melius Research, said in an interview. "Honestly, I feel like I've been writing the same report for years, it's just been a repeat of 'When will this finally end?'
The company says they take these issues seriously and will continue to work on making their devices safer.
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