UPS has cut half of Amazon's delivery volume between the start of 2025 and the middle of 2026 as it shifts toward higher-margin business. The stock has fallen since the move was announced, and UPS's own filings show fuel surcharges, not the strategy shift, are driving most of this year's revenue growth.
UPS's decision to cut 50% of Amazon's delivery volume from the start of 2025 to the middle of 2026 fits its stated strategy, but the market wants proof before rewarding the move. UPS stock has fallen 10.5% since the announcement, with investors focused on margin quality rather than the volume cut itself.
Why UPS walked away from Amazon volume
CEO Carol Tomé's "better, not bigger" strategy moves UPS away from chasing volume growth and network scale toward higher-margin services such as healthcare, small and medium-sized businesses, and business-to-business e-commerce. The company is also investing in automation and smart facilities that let it consolidate sites and run a leaner network. Cutting low-margin Amazon deliveries, which often involve bulky items sent to hard-to-reach residential addresses, lines up with that shift.
Guidance rose, but margin guidance fell
At the start of the year, UPS guided to full-year revenue of $89.7 billion and an adjusted operating profit margin of 9.6%, implying an adjusted operating profit of $8.61 billion. By its second-quarter earnings release, management raised that to $8.65 billion in full-year adjusted operating profit on revenue of $91.2 billion. That looks like an improvement, but it implies a margin of just under 9.5%, below the original 9.6% target.
Fuel surcharges mask the underlying trend
UPS's SEC filings show it raised its fuel surcharge by $1.173 billion in the first six months of 2026, while third-party fuel surcharges and fuel expenses together rose by $744 million. UPS said the remaining $429 million gap was also affected by higher fuel and network costs tied to the Middle East conflict. Fuel surcharges account for most, if not all, of the $1.5 billion increase in full-year revenue expectations. If that $429 million did flow through to profit, it alone would exceed the $400 million implied increase in full-year adjusted operating profit guidance.
Higher fuel surcharges aren't a sustainable way to grow revenue and earnings, and even with that boost, it appears UPS isn't meeting its original margin target, a disappointing result given that improved margins were the point of cutting Amazon volume.
Source: The Motley Fool
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