Amazon.com Inc (NASDAQ:AMZN) announced that it has entered into a multi-year agreement with FedEx Corp (NYSE:FDX, ETR:FDX) to handle the delivery of large and bulky residential packages across the US.
The partnership marks a renewal of relations between the two companies after FedEx ended its contract with Amazon in 2019.
Under the new agreement, FedEx will deliver selected oversized items such as furniture and appliances to all US Zip codes.
The contract is expected to be more profitable for FedEx than past arrangements, with anticipated higher yields and heavier package weights compared to the US ground market average.
FedEx’s improved cost structure has reportedly allowed it to offer Amazon more competitive pricing, a key factor in securing the deal.
The timing of the agreement comes as United Parcel Service Inc (NYSE:UPS), Amazon’s previous major delivery partner, plans to cut its delivery volumes for Amazon by more than 50% by mid-2026 due to unprofitability.
UPS has also announced a reduction of 20,000 jobs as part of its restructuring.
Amazon stated that the deal with FedEx does not replace UPS but is part of a broader multi-carrier strategy that includes UPS, the US Postal Service, and Amazon’s own delivery network.
Bank of America analysts see the deal as accretive to yields and profitability for FedEx.
“Chief commercial officer Brie Carere noted the deal will be financially accretive to FedEx with yields and weights above system-average in its domestic market (FedEx Ground) portfolio, and will leverage FedEx's ability to move heavy, hard-to-handle packages across all US zip codes,” analysts wrote. “Despite the add-on, Amazon will still not be FedEx’s largest customer.”
Shares of FedEx were unchanged on the news, trading hands at $233, while UPS shares fell 1.3% to about $100.