Amazon Signs FedEx for Residential Deliveries Amid UPS Cutbacks

Amazon has signed a multi-year agreement with FedEx to handle residential deliveries of select large packages, marking a renewed collaboration between the two logistics giants.

The deal, finalised in February, positions FedEx alongside existing Amazon partners such as UPS and the U.S. Postal Service and follows UPS’s recent decision to cut back on its Amazon-related delivery volumes.

FedEx shares surged 7% following the announcement, significantly outperforming the broader market.

Amazon stated the deal offers “cost favourability” compared to UPS, according to an internal document cited by Business Insider.

FedEx, which cut ties with Amazon in 2019, described the agreement as “mutually beneficial.”

This development arrives as Amazon pushes to optimise its logistics infrastructure and reduce operating costs.

Bank of America Securities analysts noted that Amazon’s eight new warehouse robots play a critical role in improving efficiency and solving long-term staffing challenges.

The robots, designed to sort and handle packages, are expected to reduce labor costs, cut employee injuries, and increase warehouse productivity.

With annual churn rates as high as 50% among Amazon’s nearly 1 million logistics and fulfilment workers, automation could significantly ease workforce pressures.

The analysts also highlighted that automation can enhance order accuracy and reduce product returns, another costly aspect of fulfilment.

As Amazon drives down operational expenses, the cost savings could enable expansion of same-day delivery services into more rural regions.

Meanwhile, UPS, Amazon’s largest delivery partner, has announced plans to reduce its shipment volumes for the retailer by more than 50% by late 2026.

The company is undergoing a major restructuring, including the elimination of 20,000 jobs and the closure of 73 facilities, as it prioritises more profitable deliveries.

Together, the FedEx deal and automation push signal Amazon’s broader strategy to reshape its logistics operations for cost efficiency, reliability, and reach, especially amid shifting dynamics in the e-commerce delivery market.