Good morning. UPS continues to rely on a strategy positioning it for long-term growth, one that has required scaling back its decades-long partnership with Amazon.
The package delivery giant (No. 47 on the Fortune 500) beat Wall Street’s third-quarter expectations, reporting revenue of $21.4 billion and adjusted EPS of $1.74 on Tuesday, both well above forecasts. It forecast fourth-quarter revenue of about $24 billion, a sign of momentum despite an unstable economy. UPS stock was up about 8% at market close.
Refocus the business
Brian Dykes, UPS’s CFO since July 2024, first joined the company as an intern in 1999. I spoke with Dykes about strategy and his first-hand perspective on the company’s evolution as a public company.
“We are transforming our U.S. operations to focus on market segments where we can add the most value,” Dykes told me. This means moving away from low-return, capital-intensive volumes and doubling down on higher-margin areas like small and medium-sized businesses, healthcare logistics and B2B delivery.
UPS’s recent decision to halve its delivery volume on Amazon by the end of 2026, after nearly 30 years of partnership, marks a major strategic shift. “I’ve been working with Amazon for over a decade,” Dykes said. “Over time, our strategies diverged, causing us to take a step back and ask ourselves where we were really adding value. »
Amazon has built fulfillment centers optimized for short-distance and last-mile delivery, while the UPS network is designed for long-distance and complex logistics. Amazon will remain a key customer in areas where UPS adds value, such as returns and international services, he said.
Even as UPS reduces some of Amazon’s volume, the share it continues to handle has increased, Dykes noted. “Amazon is so big that it doesn’t look like the average customer,” he said.
As part of this realignment, UPS will eliminate approximately 34,000 operational positions in 2025, largely through attrition and targeted buyouts. Most of the cuts have been to part-time positions, although the company has also offered voluntary packages to drivers, Dykes said. As part of its turnaround strategy, the company also closed operations at 93 facilities and eliminated 14,000 management positions.
Does he think UPS is ready for the holiday season? “Peak season is like our Super Bowl,” Dykes said. Because UPS handles less volume from Amazon, it doesn’t need as much additional capacity or as many seasonal hires, he said. UPS expects volume to increase 20% between the third and fourth quarters, or about 4 million more packages per day, consistent with recent years, Dykes said.
Healthcare as an engine of growth
During our conversation about strategy, Dykes pointed out that UPS’s focus on healthcare predated the pandemic. He helped build this vertical through targeted acquisitions, citing cold chain logistics (a temperature-controlled supply chain), quality assurance and regulatory oversight as differentiators, and leveraging automation and AI for greater efficiency.
“Since 2016, we’ve grown this business from zero to $10 billion within UPS,” he said. Health care customers stay longer, grow faster and margins are higher, Dykes said, which he said is a winning formula even in the face of economic or pricing disruptions.
I asked Dykes about her strategic working partnership with Carol Tomé, who has served as CEO of UPS since 2020 and previously served as CFO of Home Depot for nearly two decades.
Dykes said he benefits from Tomé’s leadership because “she pushes our entire leadership team to be better.”
“Part of my decision to take this job,” he added, “was the understanding that sometimes I would have to be the one to respond – and we have that healthy tension. But at the same time, it made me a much better executive than I was when I started.”
Sheryl Estrada
sheryl.estrada@fortune.com
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Ranking
Adam S. Elinoff has been named Chief Financial Officer of Agilent Technologies, Inc. (NYSE: A), effective November 17. Elinoff has more than two decades of experience in corporate finance, investment relations and business transformation. He joins the company from Amgen, where he held a series of senior finance, strategy and transformation roles spanning a total of 19 years, most recently as vice president of finance and treasurer.
Kathryn (Katie) Eskandarian has been named CFO onPhase, a financial automation and payments provider. Eskandarian brings more than two decades of leadership in finance and operations. Prior to joining onPhase, Eskandarian served as CFO at Visual Lease, where she built the financial and operational frameworks. Earlier in her career, she held financial leadership positions at iCIMS and Geller & Company.
Big deal
The Fortune 500 Europe 2025 list was released this morning. The largest European company, the German car manufacturer Volkswagen (founded in 1937), takes first place.
Total revenues for the 500 rose 2.5% to $14.9 trillion, and market capitalization climbed 13.7% to $15.9 trillion. Profits, however, fell 5.1% to $978.2 billion.
The top three sectors by revenue – finance (107 companies, $3.5 trillion), energy (71 companies, $3 trillion), and motor vehicles and parts (23 companies, $1.4 trillion) – are all being reshaped by digital technology and, in the case of energy, by renewable energy. Yet the dominant players remain well-established historical players rather than new disruptors.
The most important newcomer in the financial sector is the Italian group CDP (No. 122, founded in 1850). The leading renewable energy company, wind turbine manufacturer Vestas (No. 226), was founded in 1945.
Go deeper
OpenAI, founded as a non-profit organization, has restructured its commercial arm into a public benefit corporation (PBC). Under the new deal announced Tuesday, Microsoft owns an approximately 27% stake in OpenAI Group PBC, valued at approximately $135 billion, and previously held an as-converted stake of approximately 32.5% in the for-profit entity. The nonprofit OpenAI Foundation retains control of PBC’s governance, ensuring the mission remains central even as the company opens up to greater equity and equity participation.
Heard
“The Hollywood working model – specialized teams coming together for specific projects, then disbanding and reconfiguring for new ones – is a refreshing alternative to the rigid corporate structures inherited from the industrial era. For decades, this fluid approach seemed impractical for most businesses. Today, it is becoming feasible as AI handles the logistical complexities and knowledge management that once required permanent bureaucracies.
—Ravi Kumar S, CEO of Cognizant, writes in a Fortune Opinion article titled “The Hollywood Model Holds the Key to Reshaping Organizations in the Age of AI.”
