UPS makes money one package at a time. Every day, 20.8 million packages move through its air and ground network across more than 200 countries. Shippers pay a fee each time UPS picks up, moves, and delivers something, whether that is a same-day critical medical shipment or a slow, cheap residential parcel. The business runs three divisions: U.S. Domestic Package, International Package, and Supply Chain Solutions, which covers freight forwarding, customs brokerage, and healthcare logistics. Total revenue in 2025 was $88.7 billion. The diagram below traces where the money goes.
How UPS Makes Money
flowchart LR
A["Global Network
5.2B packages/yr"] --> B["Small Package
Services
$68.4B revenue"]
A --> C["Supply Chain
Services
$20.3B revenue"]
B --> D["Operating Cash
$8.4B/yr"]
C --> D
D --> E["Technology
Investment
RFID, AI, Digital"]
E --> F["Network Efficiency
Cost Reduction"]
F --> A
E --> G["Customer Acquisition
SMB Penetration 30%"]
G --> A
D --> H["Strategic M&A
Healthcare Logistics
$11B revenue"]
H --> A
Five years of financial data tell a story of a peak, a fall, and a deliberate restructuring. Revenue climbed to $100.3 billion in 2022, then dropped sharply. By 2025 it had fallen to $88.7 billion. That is not simply a bad economy. UPS made a choice: it intentionally pushed away its largest customer, Amazon, cutting that volume by more than 50% from 2024 levels by June 2026. Amazon alone represented 10.6% of 2025 revenues. Losing that volume on purpose while trying to replace it with higher-margin customers is the central gamble of the current strategy.
UPS Annual Revenue (2021 to 2025)
Revenue peaked in 2022 and has declined each year since. The 2025 drop reflects both the deliberate reduction of Amazon volume and the sale of the Coyote truckload brokerage business in 2024.
Cash generation has followed the same downward path. Operating cash flow was $15.0 billion in 2021. By 2025 it had fallen to $8.4 billion. Free cash flow, the money left after capital spending, dropped from $10.8 billion in 2021 to $4.8 billion in 2025. At the same time, net debt climbed from $9.5 billion in 2021 to $18.2 billion in 2025. UPS is generating less cash and carrying more debt than it did four years ago. That combination limits how much flexibility the company has if the restructuring takes longer than planned.
$10.8B
Free Cash Flow 2021
$4.8B
Free Cash Flow 2025
Free cash flow has been cut more than in half over four years, even as UPS returned $6.4 billion to shareholders through dividends and share repurchases in 2025 alone.
The strategic logic behind the shrinkage is straightforward. Amazon volume was high in quantity but low in price per package. By removing it, UPS raised its average revenue per piece by 6.6% in 2025, to $14.50. The company closed 85 buildings permanently in 2025 and cut about 48,000 operational positions. It says it saved $3.5 billion in costs in 2025 through these Network Reconfiguration and Efficiency Reimagined initiatives, and expects roughly $3 billion more in savings in 2026. The goal is a leaner network carrying fewer but more profitable packages.
2025
milestone
Deliberate Shrink: Cutting Amazon to Build Margin
UPS set a target to cut Amazon volume by more than 50% by June 2026 from 2024 levels. In parallel, it closed 85 buildings, cut roughly 48,000 positions, and launched its Network Reconfiguration and Efficiency Reimagined programs. The company also acquired Frigo-Trans and Andlauer Healthcare Group to expand cold-chain healthcare logistics. Its global healthcare portfolio generated more than $11 billion in revenue in 2025, pointing toward the higher-margin customer base UPS is trying to build.
The healthcare push is the clearest signal of where UPS wants to go. Cold-chain medical shipments, specialty drug deliveries, and pharmaceutical logistics require precise handling, reliable tracking, and deep expertise. They are harder to copy than standard parcel delivery and typically command higher fees. UPS says its goal is to become the number one complex healthcare logistics provider in the world. The $11 billion in global healthcare revenue in 2025 shows this is already a real business, not just an ambition.
$11B
UPS global healthcare portfolio revenue in 2025, generated through cold-chain logistics, specialty pharma delivery, and the Frigo-Trans and Andlauer Healthcare Group acquisitions completed that year.
Three specific risks stand out from the filing. First, labor. Nearly 80% of U.S. employees are represented by unions, primarily the Teamsters. The national contract expires July 31, 2028. A strike or slowdown would not just disrupt deliveries temporarily. It could push large customers to FedEx or regional carriers permanently. Second, fuel. UPS operates one of the world's largest private airline and truck fleets. Fuel costs can spike without warning, and while UPS charges fuel surcharges, customers who face big increases may shift to cheaper options or competitors. Third, Amazon dependency in reverse. Cutting Amazon volume solves one problem but creates another. The company must fill that capacity with new customers fast enough to prevent the empty network from dragging down margins further before the restructuring savings kick in fully.
What Is a Fuel Surcharge?
A fuel surcharge is an extra fee UPS adds to shipping bills when fuel prices rise. It is adjusted weekly based on published government fuel price indexes. The surcharge helps UPS recover higher fuel costs, but if the surcharge gets too large, some customers may decide to ship less or switch to a cheaper carrier.
There is also a newer threat from trade policy. In 2025, changes to U.S. tariffs and the removal of the de minimis exemption, which previously allowed low-value packages from China to enter the U.S. duty-free, reduced volumes on the China-to-U.S. trade lane. That hurt the International Package segment's operating margin, which fell from 17.8% in 2024 to 15.5% in 2025. Trade policy can shift again in either direction, making this an unpredictable variable that sits outside UPS's control.
What Is De Minimis?
De minimis is a rule that let low-value packages, often under $800, enter the U.S. from other countries without paying import taxes. It was heavily used by e-commerce shipments from China. When the U.S. removed or restricted this exemption in 2025, the volume of those small packages dropped sharply, which hurt shipping companies that carried them.
$18.2B
UPS net debt at end of 2025, up from $9.5 billion in 2021, reflecting acquisitions, restructuring costs, and continued shareholder returns even as cash generation declined.
Cybersecurity is a quieter but real risk. UPS tracks billions of packages using interconnected computer systems. A ransomware attack or data breach could freeze operations, expose customer data, and trigger regulatory fines. The company's growing use of artificial intelligence tools adds new surfaces for potential attacks. A major outage during peak shipping season, like the November and December holiday rush, could cause customers to permanently reroute their business.
UPS delivered an average of 20.8 million packages every single day in 2025. That is roughly 240 packages every second, all of which need to be tracked, sorted, and delivered on time.
The Bet
UPS can replace the lost Amazon volume with enough higher-margin business, primarily healthcare logistics and small and medium-sized businesses, fast enough and at large enough scale to expand margins even as total package count falls. If the new customer mix does not grow fast enough, or if the restructured network sits partially empty for longer than planned, the cost savings from closing 85 buildings and cutting tens of thousands of positions will not offset the revenue lost by deliberately walking away from the largest customer in the business.
Open question
UPS has bet its near-term financial trajectory on a deliberate shrink: fewer packages, higher prices per package, a leaner network, and a pivot toward complex healthcare logistics. Revenue has fallen for three straight years. Free cash flow is less than half what it was in 2021. Net debt has nearly doubled. The restructuring savings are real but so are the execution risks. Can UPS build its healthcare and small-business revenue fast enough to fill the gap left by Amazon, before rising debt, falling cash flow, and the next Teamsters contract negotiation in 2028 put the whole restructuring under pressure?
Compiled · 10-K · FY2025
Customer Concentration
Amazon and its affiliates accounted for 10.6% of revenues in 2025, and the company has a strategy to intentionally reduce volume from this largest customer. If the company cannot successfully adjust its facilities, vehicles, aircraft and workforce to match lower volumes, or if other major customers reduce business unexpectedly, profitability could be seriously harmed.
Labor Relations
Many U.S. employees work under union agreements with the Teamsters, with the national contract expiring July 31, 2028. Strikes, work stoppages or slowdowns could prevent the company from serving customers, causing permanent customer loss. Union negotiations could also result in significantly higher labor costs.
Cybersecurity and Data Protection
The company relies on computer systems to track packages, process billing, manage employee data and run operations. Cyberattacks, ransomware, data theft or system failures could disrupt operations, expose customer and employee information, result in fraud, cause customers to leave, and trigger regulatory fines and lawsuits. The company's increasing use of artificial intelligence adds new security risks.
Fuel and Energy Costs
The company requires large amounts of gasoline, diesel and jet fuel for vehicles and aircraft. Rising fuel prices could significantly increase operating costs. Even if the company adds fuel surcharges to customer bills, customers may switch to cheaper shipping options or use competitors, reducing total revenue.
Climate Regulation
European regulations now require jet fuel suppliers to include increasing percentages of more expensive sustainable aviation fuel, reaching 70% by 2050. The company must also monitor and report aviation emissions for certain European routes. Expanded climate regulations in the U.S. or elsewhere could force expensive aircraft and vehicle upgrades or significantly increase fuel costs.
10-K Item 1A · Risk Factors
