The United States Postal Service (USPS) recently struck a deal with Amazon (AMZN +2.05%) 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 (UPS +0.06%). It's reducing its relationship with Amazon, but is that a smart business move -- or one that will come back to haunt it?
Image source: The Motley Fool.
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.
