Amazon’s long-running partnership with the U.S. Postal Service may be heading toward a major turning point. After months of negotiations over a new delivery agreement (and an unexpected change in how USPS wants to work with its biggest customers) Amazon is now weighing whether to take its entire package business in-house.

The two sides have been working to renew their contract before it expires in October 2026, but according to reports, the talks haven’t gone anywhere. What really changed the tone was the Postal Service’s plan to hold a reverse auction in early 2026, which would force companies to bid for access to USPS facilities. 

That means Amazon, UPS, FedEx, and regional carriers would all be fighting for the same capacity. For a company that ships more than 6 billion packages a year in the U.S., that’s a big change from the long-standing, direct agreement Amazon expected to continue.

It’s easy to see why that set off alarm bells. Amazon is USPS’s biggest customer, responsible for more than $6 billion in annual revenue, or about 7.5% of the agency’s total in 2025. 

Losing that volume would be a heavy blow for a service that has posted losses in nine of the last ten years, even after raising prices and receiving a $107 billion boost from Congress in 2022. Packages have quietly become the Postal Service’s most important revenue driver as traditional mail declines, and without Amazon, the gap becomes much harder to fill.

At the same time, Amazon is in a far stronger position to walk away than it was a decade ago. The company has built a delivery system that increasingly resembles a national carrier. For instance, its own fleet of cargo jets, thousands of vans (many of them electric) a massive contractor workforce, and ongoing investments in new technology through its Zoox autonomous vehicle unit. 

Of course, replacing USPS completely would be a huge undertaking, but not an unrealistic one. In many areas, Amazon already handles most of its own last-mile volume while USPS fills in gaps that are less efficient for private carriers to cover.  If Amazon decides to fully build out a rival network, it would simply be accelerating a direction the company has been moving in for years.

Still, Amazon hasn’t given up on reaching a deal. Spokesperson Steve Kelly described USPS as a “long-standing and trusted partner” and said Amazon is still looking for a way to extend the arrangement. CEO Andy Jassy even met virtually with Postmaster General David Steiner in November, though the talks didn’t produce a breakthrough. 

The challenge now is that the Postal Service’s auction plan adds a layer of uncertainty that wasn’t part of earlier discussions, and Amazon isn’t eager to base its nationwide delivery operations on a process that could change year to year.

Where things go from here depends largely on whether the two sides can find middle ground before the clock runs out. If they do, the partnership may continue with only minor adjustments. 

If the deal falls apart, the U.S. might be on the verge of its biggest shipping shake-up in decades. Amazon running its own postal-style network from coast to coast, and USPS losing its largest customer at a moment when it can least afford it. For now, everything is still in motion… but 2026 is coming fast, and both sides know it.

At the time of publishing this article, Stocks.News holds positions in Amazon as mentioned in the article.