United Parcel Service (UPS) delivered better-than-expected first-quarter earnings on Tuesday, but the positive results were accompanied by a stark announcement: the company plans to cut up to 20,000 jobs and close dozens of facilities in response to a slowdown in Amazon deliveries and broader economic uncertainty.
The restructuring effort is part of a larger strategy to streamline operations and shift focus toward more profitable logistics services.
The company’s shares rose 2.2% in pre-market trading following the earnings report and restructuring news.
UPS said the changes could generate $3.5 billion in cost savings by 2025, as it aggressively reduces its exposure to low-margin e-commerce shipments.
*UPS TO CUT 20,000 POSITIONS IN 2025 DUE TO AMAZON DOWNSIZING
Amazon volumes drop, triggering network overhaul
UPS has long counted Amazon (AMZN) as its biggest customer, but the delivery giant is pulling back from that partnership due to shrinking profit margins.
In January, UPS announced plans to cut Amazon parcel volumes by over 50% within 18 months.
The current move, which includes closing 73 leased and owned buildings by the end of June, is the next phase of that shift.
The job cuts, which would affect around 4% of UPS’s roughly 490,000 employees, will impact operational roles such as delivery drivers and package handlers.
This follows a separate announcement earlier this year that 12,000 management jobs would also be eliminated.
Strong Q1 performance, but outlook remains cautious
Despite economic headwinds, UPS reported adjusted earnings of $1.49 per share in the first quarter, beating the analyst consensus of $1.40, according to Bloomberg.
Revenue also slightly exceeded expectations, supported by strength in both domestic and international shipping operations.
However, UPS withdrew its 2025 financial guidance, citing “macroeconomic uncertainty.”
The company had previously projected full-year revenue of about $89 billion and an operating margin of 10.8%, but those targets are now under review.
Trade tensions and shifting strategy shape UPS’s future
Like FedEx, UPS serves as a bellwether for the global economy, given its presence across manufacturing and consumer sectors.
But new challenges — including US trade tensions under President Donald Trump’s latest tariffs — have made long-term forecasting increasingly difficult for logistics firms.
As part of its new focus, UPS is leaning heavily into healthcare logistics.
Just last week, it announced a $1.6 billion acquisition of Canada’s Andlauer Healthcare Group, a provider of temperature-controlled and urgent medical shipments.
The deal supports UPS’s goal to grow its healthcare revenue to $20 billion by 2026.
Second-quarter outlook coming soon
While the company has withheld an updated annual forecast,
UPS said it would provide specific guidance for the second quarter later on Tuesday.
UPS: “Given the current macro-economic uncertainty, the company is not providing any updates to its previously issued consolidated full-year outlook.”
Investors will be watching closely as the company navigates shifting consumer trends, cost pressures, and evolving trade dynamics — all while reinventing itself for a leaner, more specialized future.
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