Amazon.com has agreed to a new deal for the U.S. Postal Service to continue providing last-mile package delivery service, but at lower levels than in previous years.
The Wall Street Journal and Reuters were first to report Monday that Amazon (NASDAQ: AMZN) had signed a tentative contract with the Postal Service to deliver about 1 billion parcels per year, which represents a 20% cut in volumes. The Journal had previously reported that Amazon planned to reduce postal shipments by at least two-thirds.
The agreement is a financial blow for the Postal Service, which receives $6 billion in revenue from its largest customer — representing about 7.5% of total revenue, but ensures continued revenue streams as Postmaster General David Steiner warns the mail carrier could run out of cash by next year. He has talked about the need for the Postal Service to do a better job of generating revenue, including through a new program that is auctioning off access to the agency’s last-mile delivery network. The agency lost $9.5 billion in fiscal year 2025, or about $2 billion when excluding non-controllable costs.
But retaining Amazon’s business preserves network density for the Postal Service, especially in less populated and hard-to-serve areas, which creates some economies of scale, industry analysts said.
Amazon confirmed the new contract. “We’re pleased to have reached a new agreement with USPS that furthers our longstanding partnership and will let us continue supporting our customers and communities together,” the company said in a statement.
The USPS didn’t respond to requests for comment.
The Postal Service is especially useful to Amazon in rural areas, where it is mandated to delivery to every address. But Amazon in the past year invested $4 billion to build out its infrastructure and capabilities for rural delivery. Over time, Amazon could insource more deliveries it currently offloads to the USPS.
Amazon “is choosing not to walk away today because rural America is still expensive to cover alone, and USPS subsidizes that cost through its universal service obligation,” said Nikhil Varshney, a supply chain manager at Wayfair who publishes a parcel newsletter on Substack, in a LinkedIn post. He predicted that Amazon will completely exit its partnership with the U.S. Postal Service in 2028.
Amazon surpassed the Postal Service as the largest domestic parcel carrier in 2025. Amazon is in the process of taking back 50% of its volume tendered to UPS. Amazon and FedEx ended a delivery partnership six years ago, but last year FedEx began handling certain large packages for Amazon.
Rank-and-file postal employees are concerned the Postal Service is underpricing its service to retain the Amazon business and won’t make money on the deal, according to a veteran letter carrier with extensive workforce contacts across the country. Amazon typically tenders the most difficult packages to deliver, such as heavy cat litter and large dog food bags, he said.
The agreement must still be approved by the Postal Regulatory Commission.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
Write to Eric Kulisch at ekulisch@freightwaves.com.
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