Reports indicate that Amazon.com (AMZN.US) is considering terminating its large-scale shipping contract with the United States Postal Service (USPS) by the end of 2026, shifting related parcel operations to its rapidly expanding logistics network. While this move has long been anticipated by the market, it could further strain USPS's already precarious financial situation—Amazon is USPS's largest customer, contributing over $6 billion in revenue in 2025 and representing one of the government agency's most profitable parcel services.

Currently, negotiations between Amazon and USPS to renew the service agreement have largely stalled. Amazon had sought to extend the partnership for four years after the current contract expires on October 1, 2026. However, USPS management favors a reverse auction model, granting facility access to the highest bidder among major carriers and retailers. This strategic shift has effectively halted talks, prompting Amazon to activate contingency plans to reroute billions of packages.

Despite the impasse, the possibility of an agreement remains, with USPS Postmaster General David Steiner and Amazon CEO Andy Jassy recently holding discussions. For Amazon, the potential termination underscores its broader strategy of building a vertically integrated logistics empire. Through an extensive warehouse network, its own fleet of delivery vehicles, and a vast network of contractors and gig drivers, Amazon is increasingly internalizing "last-mile" deliveries in the U.S., directly competing with USPS, United Parcel Service (UPS.US), and FedEx (FDX.US).

Historically, Amazon heavily relied on UPS and USPS for parcel shipping—USPS long served as a core partner for long-haul and two-day deliveries, while Amazon focused on order fulfillment rather than transportation. However, repeated holiday-season logistics bottlenecks in the 2010s and rising shipping costs accelerated Amazon's push to develop its own logistics infrastructure, reducing dependence on external carriers by adding cargo planes, delivery vans, and distribution hubs.