Amazon Absorbs Millions of Daily UPS Packages as Retail Giant Builds Its Own Delivery Empire

Key Points

• UPS says it eliminated about 2 million pieces per day of lower-quality Amazon volume.

• Amazon’s logistics arm delivered an estimated 6.7 billion U.S. parcels in 2025, passing the U.S. Postal Service.

• Amazon’s worldwide shipping costs hit $27.9 billion in the second quarter, up 19% year over year.

UPS (NYSE:UPS) spent 18 months deliberately reducing its relationship with its largest customer, culminating in a formal announcement on July 28 that the process was complete. During the company’s second-quarter earnings release, CEO Carol Tomé stated that UPS had “successfully completed our Amazon glide down and related network reconfiguration initiatives as designed,” thanking employees for their efforts.

The magnitude of this strategic shift is significant. On the earnings call, Tomé revealed that UPS had eliminated approximately 2 million pieces per day of what she characterized as lower-quality Amazon (NASDAQ:AMZN) volume, resulting in roughly $4.5 billion in related expense reductions.

For Amazon shareholders, this raises an important question: with 2 million packages per day no longer moving through UPS trucks, who is now responsible for delivering them, and at what cost?

Image source: Amazon.

UPS Achieves Its Strategic Objective

UPS’s financial results clearly demonstrate the positive impact of shedding this volume. Second-quarter U.S. domestic revenue increased 6% year over year, driven by a 9.3% rise in revenue per piece. The segment’s non-GAAP operating margin improved to 8%, representing a full percentage point gain from the prior year. Additionally, the company raised its full-year revenue outlook to approximately $91.2 billion.

During the earnings call, Tomé noted that excluding Amazon and the intentionally divested volume, UPS experienced overall volume growth in the second quarter. This indicates that the packages UPS eliminated were indeed contributing to margin compression rather than enhancement.

Residential e-commerce delivery typically carries higher costs relative to what shippers are willing to pay. As UPS reduced this lower-margin residential volume, its overall profitability improved accordingly.

Amazon Emerges as the Nation’s Leading Parcel Carrier

The majority of this volume appears to have shifted toward Amazon’s own logistics operations. According to ShipMatrix data, Amazon’s delivery division handled an estimated 6.7 billion U.S. parcels in 2025, surpassing the U.S. Postal Service’s 6.6 billion packages. UPS delivered 4.4 billion parcels, while FedEx managed 3.6 billion during the same period, establishing Amazon as the largest parcel carrier by volume in the United States.

The growth trajectories highlight this dramatic shift. ShipMatrix found that Amazon’s volumes increased nearly 10% in 2025, while both UPS and the Postal Service experienced 8.6% declines. FedEx remained the sole traditional carrier among the three to show volume growth.

It’s worth noting that Amazon has not disclosed exactly how much of the departed UPS volume it absorbed directly. The company continues to utilize the Postal Service and other carriers for portions of final-mile delivery, meaning some volume simply moved between carriers rather than being entirely captured by Amazon’s network.

However, Amazon’s proprietary delivery infrastructure is rapidly expanding. The company is investing over $4 billion to triple its rural delivery footprint by year-end, growing to more than 200 delivery stations covering over 13,000 ZIP codes—capacity projected to handle over 1 billion additional packages annually. This rural expansion represents just one component of Amazon’s broader capital expenditure strategy focused on delivery infrastructure.

This approach contrasts sharply with traditional carriers. Last year, FedEx and UPS implemented remote-delivery surcharges of approximately $15.50 and $15.35 per package, respectively. Amazon is instead building operational density in precisely those areas where its competitors charge premium rates.

Substantial Shipping Expenses Accompany Network Expansion

This expanded capacity comes at a significant cost. Amazon’s second-quarter worldwide shipping expenses reached $27.9 billion, marking a 19% increase from $23.4 billion in the comparable period last year. Across the first half of 2026, shipping costs climbed 17% to $53.6 billion, indicating accelerating investment throughout the year.

This cost escalation outpaces revenue growth. Amazon’s online store sales increased 15% year over year in the second quarter, meaning the delivery bill is growing at a faster rate than the revenue it serves.

Despite these rising costs, Amazon continues to prioritize delivery as a core competitive advantage. The company’s regulatory filings attribute part of its sales momentum to “fast shipping offers,” recognizing that consistent delivery performance enhances customer loyalty and retention.

The fundamental trade-off is evident in these figures: shipping costs rising 19% against 15% online store growth. While UPS has successfully moved past this volume challenge, Amazon assumes the responsibility—and expense—of managing these packages through its own network infrastructure.

Investor Considerations for United Parcel Service Stock

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Daniel Sparks and his clients do not hold positions in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and United Parcel Service. The Motley Fool recommends FedEx. The organization maintains a disclosure policy.

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