Originally published: January 30, 2025
Updated: March 2026
"Amazon is our largest customer, but it's not our most profitable customer"
- Carol Tome, UPS CEO
UPS has announced a 50% reduction in its long-standing partnership with Amazon, stunning the logistics industry.
This significant scaling back of services marks one of the most substantial shifts in the relationship between the two shipping giants. In fact, by 2026 UPS executives describe the company as being in the final months of an "accelerated glide down" with Amazon, actively pulling additional daily Amazon volumes out of its network as part of a broader strategic reset.
The decision, which surprised many industry analysts, represents a major strategic pivot for UPS as it restructures its business model. The move could also reshape the broader e-commerce delivery landscape, influencing shipping costs, carrier partnerships, and competitive dynamics across the parcel market.
Independent parcel studies now estimate that Amazon ships more U.S. parcels annually than either UPS or FedEx. If current trends continue, Amazon could surpass the Postal Service’s parcel volume before the end of the decade — making a smaller UPS–Amazon relationship increasingly unavoidable.
"This was UPS taking control of our destiny,"
- Carol Tome, UPS CEO
Under a groundbreaking agreement between the two companies, UPS will reduce its Amazon-related shipping volume by more than 50% by the second half of 2026. This shift marks a significant change in the current logistics landscape.
As of early 2026, UPS has already removed roughly 1 million Amazon packages per day from its network. And the company has indicated it plans to cut another 1 million daily Amazon packages throughout 2026, continuing a deliberate wind-down of the long-standing partnership.
Over recent years, the partnership between the two shipping giants has experienced a steady decline. The reason for the decline? Amazon has been building its own logistics and fulfillment operations. Amazon now has its own blue fleet and is no longer wondering “what brown can do” for them. At the same time, Amazon has leaned on a mix of USPS and commercial carriers while expanding its delivery service partner (DSP) program, giving it more flexibility to backfill capacity as UPS steps back.
The market response to this announcement was immediate and dramatic with shares from UPS plunging more than 17% following the news.
The announcement surprised many analysts, particularly in regards to the timing and scale of the reduction. For example, Ravi Shanker, a Morgan Stanley analyst, noted that Amazon could account for between 35% and 40% of UPS’s domestic volumes. Yes, it's less than in previous years, but it's not an inconsequential amount. It's still a decent chunk of UPS’s domestic volumes. Which, again, makes us wonder why the great split between UPS and Amazon is happening now. UPS has framed this as a deliberate move to trade low-yield volume for better margins, positioning the Amazon reduction as central to its 2026 profit-improvement plan.
Last year, UPS unveiled an extensive operational transformation plan centered on premium services and network efficiency. The company’s goal? To position itself as the leading logistics partner – worldwide.
How is UPS planning on achieving said goal? Let’s take a look, shall we?
UPS has kept it no secret. It is now actively pursuing growth in the healthcare sector, and has set an ambitious target to double its healthcare-related revenue to 20 billion by 2026. Why? The healthcare logistics market is where the money is at, with growth projected to expand from 130 billion to 152 billion by 2026. The pharmaceutical industry has also been a darling of UPS, with pharmaceutical customers generating 45% of UPS’s early morning delivery volume.
As part of its efficiency push, UPS announced plans to save 3 billion annually by 2028. To help with these efforts, early last year, UPS eliminated 12,000 non-union positions. UPS is also accelerating its automation initiatives across its facilities. By 2026, UPS plans to triple the number of buildings with automated technologies to 400 across the United States.
In early 2026, UPS also announced plans to cut up to 30,000 additional operational roles and close more facilities as it consolidates its U.S. network around fewer, more automated hubs.
In March 2024, UPS rolled out its new initiative — “Network of the Future.” Here are some of the UPS optimization plans that were included in the new initiative:
These moves are now directly tied to the wind-down of the Amazon relationship, with UPS redeploying capacity toward higher-margin segments like healthcare, small-to-medium e-commerce, and international exports.
The logistics industry faces a significant transformation as competitors and regional carriers position themselves to capture market share from the realignment of UPS and Amazon. This shift will provide opportunities while also reshaping the logistics landscape.
In 2025, Amazon signed a new multi-year deal with FedEx to handle a portion of its larger residential parcels, using FedEx alongside USPS and remaining UPS capacity to complement its in-house last-mile network. This highlights Amazon's multi-carrier strategy: Lean more heavily on its own fleet and DSP partners, while strategically deploying FedEx, USPS, and other carriers where they add capacity or service advantages.
Only time will tell how this great split will shake out.
UPS’s decision to slash its Amazon partnership marks a defining moment in the evolution of logistics. Rather than continue maintaining traditional carrier relationships, companies now seek diverse shipping solutions across an expanding network of providers. For online sellers and 3PLs, this means a greater need to orchestrate multi-carrier shipping strategies and to stay flexible as Amazon, UPS, FedEx, and regional carriers continue to realign capacity.
Therefore, UPS’s pivot toward premium services, especially when it comes to the healthcare industry, demonstrates the company's commitment to higher-margin business segments. Pair that with UPS’s cost reduction initiatives, and you can expect that there will be more shakeups on the horizon if UPS wants to meet all the goals they set for 2026. As these strategies play out, shippers that invest in modern inventory and order management systems will be best positioned to take advantage of new carrier options while maintaining service levels their customers expect.
To stay ahead of these shifts, many merchants are turning to platforms like cloud-based inventory management software, 3PL inventory management tools that centralize orders, inventory, and multi-carrier shipping workflows in one place.
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