UPS rallies on 2026 guidance beat amid Amazon volume shakeup
Logistics giant targets 12% U.S. domestic margins as it reshapes business around higher-margin deliveries
United Parcel Service shares extended gains after the delivery giant issued 2026 revenue guidance that topped Wall Street expectations, signaling confidence in a strategic overhaul that includes dramatically reducing its reliance on Amazon business.
UPS projected consolidated revenue of approximately $89.7 billion for 2026, beating analyst consensus estimates of $88.18 billion by 1.7 percent. The company also forecast a non-GAAP adjusted operating margin of around 9.6 percent for the year, while targeting a more ambitious 12 percent U.S. domestic operating margin by the fourth quarter of 2026.
The guidance reflects a pivotal shift in UPS's business model under chief executive officer Carol Tomé, who has championed a "better not bigger" strategy. Central to that transformation is what the company calls an "Amazon glide-down"—a planned reduction of more than 50 percent in delivery volume from its largest customer by mid-2026. UPS expects this strategic decline to create an "inflection point" for growth and sustained margin expansion in the coming year.
The company is simultaneously executing its "Network of the Future" initiative, a comprehensive automation and consolidation program that generated $3.5 billion in cost savings during 2025 and is expected to deliver another $3 billion in savings during 2026. As part of this overhaul, UPS reduced its operational workforce by approximately 48,000 positions last year—including 15,000 fewer seasonal hires—and closed daily operations at 93 leased and owned buildings.
"2025 was a year of considerable progress in strengthening revenue quality and building a more agile network," Ms. Tomé said in the earnings announcement. "I want to thank UPS employees for their commitment, as we delivered best-in-class service during peak for the eighth year in a row and outperformed our financial expectations in the fourth quarter."
The strategic pivot comes as UPS seeks to pivot away from low-margin bulk deliveries toward more profitable small and medium-sized business shipments, healthcare logistics, and international services. While reducing Amazon volume presents near-term revenue headwinds, analysts have largely endorsed the long-term rationale. UPS stock is up approximately 9 percent year-to-date, reflecting growing investor confidence in the turnaround strategy.
Wall Street's reaction has been measured but optimistic. The average 12-month analyst price target has increased to around $107, roughly in line with the current share price, according to recent data. Of the 30 analysts covering the stock, 14 rate it a buy, 13 recommend hold, and three suggest selling, reflecting cautious optimism about the margin improvement story against concerns about volume decline.
UPS's guidance beat comes amid a broader challenging environment for logistics providers, as e-commerce growth normalizes following pandemic-era surges. The company's trailing twelve-month revenue stands at $89.5 billion, down 3.7 percent year-over-year, while quarterly earnings have declined 14.1 percent. However, operating margins have shown improvement, with the company recording a 10.2 percent operating margin over the past twelve months.
The 12 percent U.S. domestic margin target represents a significant expansion from current levels and would mark a key milestone in UPS's transformation. Analysts note that achieving this goal will depend heavily on the company's ability to successfully replace Amazon volume with higher-margin business while maintaining service quality during the network transition.
UPS plans approximately $3 billion in capital expenditures for 2026 and expects dividend payments of around $5.4 billion, subject to board approval. The company anticipates an effective tax rate of approximately 23 percent for the year.