UPS Ditches Low-Margin Amazon Deliveries, But Stock Suffers
UPS has been reducing Amazon's delivery volume by 50% from the start of 2025 to mid-2026 as part of its 'better, not bigger' strategy. This shift is aimed at focusing on higher-margin segments such as healthcare, small and medium-sized businesses (SMBs), and business-to-business (B2B) e-commerce.
Despite this strategic move, UPS stock has dropped 10.5% since the announcement due to concerns over margin performance and earnings quality. The company's recent guidance revisions indicate revenue growth driven largely by increased fuel surcharges rather than operational efficiency.
The market is questioning whether UPS can achieve its targeted margin improvements despite reducing low-margin Amazon deliveries. A closer look at the numbers reveals that increasing fuel surcharges account for a significant part of the increase in revenue expectations, which may not be sustainable.