**UPS to Reduce Amazon Deliveries, Impacts on Profitability Expected**
United Parcel Service (NYSE: UPS) is set to reduce its delivery volumes for Amazon by 50% from early 2025 through the second half of 2026. This strategic shift is expected to lower overall delivery volumes but could enhance revenue per package, potentially leading to margin expansion and profit increases. However, the company is facing challenges in maintaining its $5 dividend due to projected free cash flow of only $5.3 billion and $5.4 billion for 2026 and 2027, respectively.
The small- and medium-sized business (SMB) market, a key area for UPS, has seen a 2.2% decline in daily volume year-over-year as of Q3 2025. The full impact of new tariffs on SMB operations is anticipated to manifest in 2026, creating uncertainty in this market segment. Despite the concerns, UPS aims to increase SMB volume from 32.8% to 40% of total U.S. volume in the long term.
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