Why This Matters to Distributors: UPS has completed its shift away from lower-margin Amazon deliveries and is rebuilding its network around the healthcare, industrial and business-to-business freight distributors ship. The strategy gives distributors a carrier with more automated capacity, new tracking capabilities, and a stronger focus on commercial customers, even as pricing remains firm.
United Parcel Service Inc. has completed the 18-month reduction of Amazon shipping volume that reshaped its U.S. delivery network, and the parcel carrier raised its full-year outlook after second-quarter operating results showed the strategy beginning to pay off.
Revenue increased 7.6% to $22.8 billion from $21.2 billion in the second quarter of 2025. Reported net income fell 52.9% to $604 million from $1.28 billion, while operating profit declined 48.9% to $930 million from $1.82 billion. Both figures were reduced by $891 million in severance costs tied to the driver choice program, a voluntary buyout offered to employees whose positions were eliminated during the company’s network overhaul.
Excluding those one-time charges, operating profit increased 12% to $2.1 billion, and net income rose 13.9% to $1.5 r.
“We executed a deliberate structural reset of our U.S. business,” CEO Carol Tomé said during the company’s earnings call.
The reset centered on reducing 2 million lower-margin Amazon packages per day while removing about $4.5 billion in related costs. UPS simultaneously expanded automation throughout its U.S. network. By the end of the quarter, 68.5% of domestic package volume moved through automated facilities, up from 64% a year earlier. Chief financial officer Brian Dykes said that it equates to 337 million additional packages processed through automated buildings over the past year.
Tomé said automated facilities handle packages at about 28% lower cost than traditional operations.
The restructuring also reduced the company’s workforce. About 80% of employees who accepted driver choice program buyouts left during the quarter. UPS has eliminated 30,000 operational positions over the past year and closed 45 facilities during the first half, with additional closures planned before year-end.
The network changes extend beyond automation.
UPS completed deployment of radio frequency identification, or RFID, technology across its U.S. package network, including delivery vehicles, facilities, UPS Store locations and customer shipping systems. Technology automatically tracks packages throughout the network rather than relying primarily on manual barcode scans.
Tomé called the investment “the most significant package visibility advancement in a decade,” adding that RFID now tracks more than 2.2 million packages each day from pickup and that UPS has not lost a customer using the technology.
For the first six months of 2026, revenue increased 3% to approximately $44 billion from $42.8 billion a year earlier. Reported net income declined 40.6% to $1.47 billion from $2.47 billion, reflecting severance and restructuring costs. Excluding those charges, net income declined 7% to $2.4 billion and operating profit fell 5.9% to $3.42 billion as the company absorbed the largest costs of reducing Amazon volume earlier in the year.
Based on first half performance, UPS raised its full-year outlook to approximately $91.2 billion in revenue.
For distributors, the more important story is where UPS expects future growth.
The company is redirecting capacity toward small and midsize businesses, healthcare providers and business-to-business customers, markets that generate higher revenue per package than residential deliveries.
Average daily volume from small and midsize businesses increased 4.3% during the quarter and now represents 34.5% of U.S. package volume, up 2.5 percentage points from a year ago.
Healthcare revenue exceeded $3 billion for a second consecutive quarter. UPS added 27 temperature-controlled facilities to strengthen pharmaceutical and medical logistics while expanding air freight service between the United States and Mexico.
The company’s digital access program, which connects ecommerce and business customers directly to UPS shipping services, generated $1.4 billion in revenue for the third consecutive quarter. Daily volume from business-to-business sellers on the platform increased 34% from a year earlier.
UPS also created a 300-person sales organization dedicated to automotive and industrial manufacturing customers, further underscoring its focus on commercial freight.
UPS has completed its transition away from low-margin ecommerce volume and is now competing more aggressively for the freight many distributors ship.
That includes industrial products, healthcare shipments and other business-to-business deliveries supported by greater network automation, improved package visibility, and dedicated commercial sales teams.
The shift could also keep pressure on parcel rates. UPS said base pricing in its commercial business increased 2.5 to 3.5 percentage points from a year earlier, suggesting distributors renewing parcel contracts should continue to expect disciplined pricing despite additional network capacity.
Amazon now accounts for about 9% of UPS revenue, down from more than 13% at its pandemic peak.
Tomé said UPS and Amazon are now focused on optimizing the mix of shipments moving through the carrier’s air and ground networks rather than continuing to reduce volume. Dykes said UPS expects package volume, excluding Amazon, to grow across every segment of its U.S. business during the second half of 2026.
Do not miss any content from Distribution Strategy Group. Join our list.
Share this article:
