UPS Ditches Amazon Deliveries, Sees Profit Margins Rebound

United Parcel Service (UPS) made a strategic decision to scale back its delivery work for Amazon early last year, cutting volumes by more than half. The move was driven by concerns that the partnership was no longer profitable enough, despite generating significant revenue.

The plan appears to have worked as hoped, with gross profits and operating cash flow stabilizing and potentially recovering faster than revenue in 2027. Notably, UPS's earnings before interest, taxes, depreciation, and amortization (EBITDA) margins and gross margins are holding up at levels above those seen in 2024, when the cost of continuing to do business with Amazon became unsustainable.

UPS's CEO Carol Tomé described the decision as 'taking control of our destiny,' which is now yielding a brighter future for the company. However, it's worth noting that returning to the remarkable profitability seen in 2022 anytime soon is unlikely due to lingering price volatility and supply chain challenges.