UPS Takes a Hit: Shipping Giant’s Revenue Guidance Sparks Concern
A Shift in Strategy
United Parcel Service (UPS) saw its stock plummet by over 17% on Thursday, following the release of its fourth-quarter earnings report. The shipping giant announced plans to reduce deliveries for its largest customer, Amazon, by more than half by the second half of 2026. This move is part of UPS’ efforts to reconfigure its U.S. network and launch multi-year efficiency initiatives, aiming to save approximately $1 billion.
Reevaluating Priorities
UPS CEO Carol Tome emphasized that while Amazon is the company’s largest customer, it’s not the most profitable one. Tome stated that Amazon’s margin is “very dilutive” to the U.S. domestic business. UPS is now focusing on making business and operational changes to become a more profitable, agile, and differentiated company, growing in the most lucrative parts of the market.
Amazon’s Response
An Amazon spokesperson, Kelly Nantel, responded to the news, saying that UPS had requested the volume reduction due to operational needs. Amazon will continue to partner with UPS and other carriers to serve its customers. Interestingly, Amazon had previously offered to increase UPS’ volumes before the announcement.
Disappointing Revenue Forecast
UPS forecasted 2025 revenue of $89 billion, a significant drop from the $91.1 billion in 2024. This falls short of consensus estimates of $94.88 billion, according to analysts polled by LSEG. The company also missed revenue expectations for the fourth quarter, reporting $25.30 billion versus the anticipated $25.42 billion.
Amazon’s Growing Logistics Empire
Amazon has been decreasing its reliance on major carriers like UPS, FedEx, and the U.S. Postal Service in recent years. Instead, it has rapidly built up its own logistics empire, overseeing thousands of last-mile delivery companies and a budding in-house network of planes, trucks, and ships. By some estimates, Amazon’s in-house logistics operations have grown to rival or exceed the size of major carriers.
UPS’ Cost-Control Measures
In response, UPS has taken more aggressive cost-control measures, focusing on catering to more profitable delivery customers. The company has benefited from an influx of volume from bargain retailers Temu and Shein, which have gained popularity in the U.S. Last January, UPS laid off 12,000 employees as part of a bid to realize $1 billion in cost savings.
A New Era for UPS
As UPS navigates this shift in strategy, it remains to be seen how the company will adapt to the changing landscape of the shipping industry. One thing is certain – UPS is committed to becoming a more profitable, agile, and differentiated company, and this latest move is just the beginning.
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