Shares of United Parcel Service (UPS) plummeted roughly 10.5% to $96.31 on Tuesday after Amazon.com (AMZN) announced it would open its logistics network to third-party businesses, a move that investors interpreted as a direct threat to the parcel delivery giant and its rival FedEx (FDX). FedEx shares fell 9.1% to $357.80 in response.
Amazon's new service, dubbed Amazon Supply Chain Services, offers companies end-to-end logistics capabilities, including freight transportation by sea, air, road, and rail, as well as storage and parcel delivery. The service leverages Amazon's vast infrastructure, which includes over 80,000 trailers, more than 24,000 intermodal containers, and over 100 aircraft. Early adopters include prominent companies such as Procter & Gamble (PG), 3M (MMM), Lands' End, and American Eagle (AEO).
This development comes at a particularly challenging time for UPS, which has been actively scaling back its low-margin Amazon deliveries to focus on more lucrative business-to-business (B2B) shipments. However, Amazon's new service directly targets this very segment, intensifying competition in the high-yield B2B shipping market.
Analysts have described Amazon's move as a significant competitive blow. Evercore ISI analysts called it "a direct competitive blow" for parcel players like UPS and FedEx, according to Reuters. Parth Talsania, CEO of Equisights Research, noted that Amazon is shifting logistics "from a cost burden into an infrastructure product."
UPS is currently in the midst of a restructuring. Last week, the company reported first-quarter revenue of $21.2 billion, with diluted earnings per share (EPS) of $1.02 and adjusted EPS of $1.07. UPS maintained its 2026 financial targets, including projected full-year revenue of approximately $89.7 billion and an adjusted operating margin of around 9.6%. CEO Carol Tomé characterized the first quarter as a "critical transition period" and expressed expectations for consolidated revenue and operating profit to grow again in the second quarter.
In January, UPS announced plans to cut up to 30,000 positions and close 24 additional facilities in 2026, partly due to declining Amazon volumes. Tomé had previously told analysts that the company was entering the final six months of its accelerated "glide down" with Amazon, targeting a reduction of one million Amazon packages per day this year.
Despite the competitive threat, some analysts caution that Amazon has yet to prove it can handle external shipping at scale without compromising service quality or venturing into thin-margin territory. William Blair's Dylan Carden pointed out that while Amazon's past moves into grocery and pharmacy initially rattled markets, the long-term outcomes were mixed, as reported by MarketWatch.
Beyond the Amazon challenge, UPS faces additional headwinds. CEO Carol Tomé recently flagged the potential drag from high gas prices linked to the Middle East conflict, which could sap demand later in the year. CFO Brian Dykes noted that rising fuel surcharges were not boosting profits because costs were climbing in tandem. J.P. Morgan's Brian Ossenbeck also raised doubts about UPS's ability to pass on those extra fuel costs, according to Reuters.
The key question now is whether UPS can maintain pricing power and rapidly cut expenses as Amazon deepens its incursion into the dense, reliable, and higher-margin business shipping segment that UPS has been fighting to protect. FedEx faces a similar competitive squeeze, but with UPS strategically stepping back from Amazon shipments, the new threat is becoming increasingly difficult to ignore.
