Pivoting from Amazon business, UPS looks to other areas for growth

The shipping giant is both a bellwether for the broader economy and a major Georgia employer. The company saw shipping surge during the COVID-19 pandemic amid the rapid rise of e-commerce. But it has also had to weather economic uncertainty, trade disputes, loss of customers during labor negotiations with the Teamsters and the rise of Amazon as not only its top customer but also as a significant shipping competitor.

Over the past 18 months, UPS has worked to reduce the lower-margin shipping it does for Amazon. Now that the Amazon drawdown is complete, UPS executives say they are pushing into more lucrative business lines, including healthcare and industrial logistics, and temperature-controlled shipments. Executives have indicated 2026 would be a year of two halves, with the second half being the “inflection” for the strategy shift.

Today, UPS is far less likely to deliver your Amazon package than it was two years ago.

The cut in Amazon volume by more than 50% at UPS has caused a monumental shift, driving it to reconfigure its shipping network. That includes job cuts and building closures.

Five years ago, UPS had more than 540,000 employees.

Now, it has slashed its headcount by about 80,000, closed hundreds of buildings, and cut vehicles and aircraft from its fleet. It offered buyouts to cut its driver ranks and reduced “layers of management” last year. In the past year alone, UPS has cut about 30,000 operational positions.

The shipping giant now has about 460,000 employees.

Although Amazon made up more than 13% of UPS’ revenue during the COVID-19 pandemic, it now makes up about 9%.

It’s part of a “better not bigger” strategy Tomé has evangelized for years. Now that the “not bigger” part is definitively a reality, the company faces the test of whether it will deliver “better.”

“Our second-quarter results marked an expected and significant shift in our performance,” Tomé said in a written statement.

In the second quarter of this year, UPS carried an average of about 19 million packages a day. That’s down from about 19.7 million a year earlier, and down from more than 24 million five years ago. The Amazon drawdown alone eliminated 2 million packages a day from UPS’ network, according to Tomé.

The transition has been taxing. UPS saw its profit decline to $604 million in the quarter ended June 30, down 53% from nearly $1.3 billion a year earlier.

But that’s after incurring $891 million in costs, mainly to pay for driver buyouts. Without charges related to its transformation, the company’s profits would have been higher than a year ago, UPS said.

The company has also been investing in artificial intelligence within its logistics network and in RFID chips to track packages.

“Think of RFID as the eyes and ears within our network, and AI as the brain,” Tomé said. “This strengthens our ability to dynamically adapt to changing conditions like weather delays or volume forecasts.

The company raised its forecasts for revenue and profit for the full year. It now expects to end 2026 with about $91.2 billion in revenue.

That would be up from last year’s $88.7 billion. In 2022, UPS ballooned to about $100 billion in revenue, but then declined.

UPS still faces external challenges, including high fuel prices, disruptions from the Iran war and from tariffs.

But, Tomé said, “As we enter the second half of the year, we’ve got momentum, even in the face of external factors that could influence our results, like war and fuel price volatility.”