Amazon.com (AMZN) 25 Oct 182018 Q3 Earnings call transcript

Good day, everyone, and welcome to the Amazon.com Q3 2018 Financial Results Teleconference. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question-and-answer session. Today's call is being recorded.

For opening remarks, I will be turning the call over to the Director of Investor Relations, Dave Fildes. ahead. go Please

to welcome XXXX results financial Hello, our call. conference and QX

questions to Olsavsky, today us is answer Joining your Brian our CFO.

XXXX. As comparable we comparisons call our encourage quarter. Please release today's in as metrics conference this have as unless period on financial to for you, results press the commentary our of in you our against front otherwise well will includes results note, of be and you the listen to which call, stated, all

comments your XXXX as and Actual Our to of today, will statements. views responses reflect management's materially. and questions forward-looking differ October only, results XX, may include

recent information about XX-K and report filings. is and results press on Additional financial subsequent release that most factors our filings impact SEC, annual our in the today's potentially Form included with could our including

IR non-GAAP of we comparable this press the slides including accompanying call, GAAP During filings these measures non-GAAP is webcast discuss which measures. reconciliations SEC, additional posted you release, measures, of with may with measures. our these our our will and find website, this disclosures each regarding In financial certain on

Our guidance trends that assumptions. what we we've order believe today incorporates be appropriate to date to seen the and

detailed and commerce fluctuations and unpredictable customer cloud services, changes online inherently our affected are the factors, events, with materially in the factors including filings world spending, results Our global economic many of growth in Internet, the by rates, exchange the and foreign maybe in conditions rate SEC. various of and

results move goods guidance. predict differ that settlements. our Operator, question. our and initiate listeners With not business investments, legal how acquisitions, remind other our for Q&A. guidance It's our to and from a that, Our therefore, materially additional also accurately to restructurings among we we'll please actual services, don't any to things, could conclude assumes, possible or demand

Thank At for this the will you. now call we questions. time, open up

the from Justin comes Post proceed. line Merrill Lynch. question Please of first Our with

little it's the is big to online a XQ but growth question. categories? interesting that to comment deceleration for then probably And you. tough or couple I kind What years? taking know one could a reaccelerate could that? Thank over guess you stores, my bit you which of the of I be in comp, Great. Thank related the initiatives what are unit next that. most maybe about

Yeah, couple growth Thank two and you, just had last May. third things a reactions We Saver second year Justin. quarter. and February you spur on Shipping the Super in our me the the let in remind a That year. threshold half did unit of of of between lot first from

count content, not not Kindle We subscriptions, do also totals and nor our that Music is issue have been It's from units – Unlimited Unlimited really popular. I'll to content particular. that Market. fact the just with do the you units remind digital in Foods Amazon those unit the an but moving issue, digital in Whole

So, essentially with we're I consumer the the say reception and customers very side. on would encouraged still by yeah, demand very, the from that backdrop,

into paid total is growing have We especially up In-stock as faster units. units paid XX% we than units. very of period. fulfilled to the XP Amazon still is are holiday now head strong,

I the think well we're for holiday. positioned

subscription we're fastest that FREE growing XXX again, metric. not advertising the that things are of for services, the caught And items available have and lot for talking a eligible Prime Two-Day We Shipping in AWS deceleration, members. Prime over are unit when areas, million like about

And, Justin, this is Dave.

on that. add to to Just

the online You mentioned stores.

Just from the is a revenue a recognition. of there bit little impact reminder,

XX% be revenue growing stores online higher but the standard. than about see you ex-FX, adoption the that, for So to ad

well. as a a there's little bit of So headwind there

you. Thank

Markets. Mark of question Mahaney Our Please with Capital line RBC proceed. next comes from

that That seemed whatever, going down anything XX% little international led I Thanks guess you'd a drill then bit would that? color? that year-over-year. tougher, retail slow a else there? was on comp have Though Okay. the the something to Any out to you was lot. to or but Any business. particularly I down, also markets ask to call

I two acquisition last year-over-year you things. have basis, Sure. the On Souq did at look to We May. think year a in

the that now in This XXXX in also fully of sales in year pickup There's year-over-year India. Diwali material lapping we're So that. full in our change Diwali be QX. on they'll year last was QX. in half the calendar and were About

in also in and area globally. those quarter we factors websites point hit that So XX international couple are I the out the launched Amazon a that now particularly. Turkey growth But have we

Prime international with business, Story the So very in expansion we're good seeing still pleased very mentioned, obviously. as is and invest country-by-country international different we're to continue benefits, still again just I pickup.

in much codes in Some than response the Diwali from very really overall in had are the happy. moved well. that's so although great Orders coming but XX% along QX, pin into India, of during the we're seen are from period. customers We've growth country. XX% further far going others, customers. new We've

So, the, great what Festival, the Diwali. Great which call first Amazon's Indian into we lead of wave

Thank you.

Anmuth comes Please of proceed. with question Douglas next line Our from JPMorgan.

the for taking Thanks question.

outlook? had significant XQ guide. And to biggest when about think be of talk income the terms about? your one-time drivers you increase operating there we operating weighing talked outlook, you or You might wage think then that just about your about special outperformance? relative upside Can how should items then that that in you've And in XQ Thanks. income on other the any minimum

Sure.

start commentary and pretty that this much QX. will Let in year be especially true the on was QX whole me with

notably great specific three advertising. we So, first had growth performance most in cost I'll areas also profitable strong all, in that had of this we've and very we've But year some very call out. AWS businesses have,

count. head on first So,

we and If XX% we Whole Foods, still without you'll for grew but head last Whole XX% XXXX With XX%, grew XX%. in if adjust was it count you year, remember, Whole Foods. Foods

new areas really movement of devices, we've company as within as of a to lot of looked we've filled we've the AWS, a roles. from those content, last had that funded years talked in have investment the invested about, couple moved, lot our a has We lot and leverage digital and

year-over-year. count So XX% nine only through we're up on months head

XX% theme step from that. in control. world, square here demand our going units. match years I've Again, some This Fulfilled fulfillment or with our investment XXXX. calls. growing and the grown the up be Network AFN banking down year by XXXX over real than by faster the last shipping Amazon about our units we're footage. square only In and we to that greater at prior that had prior talked paid gain a that strong Making about for our footage in years, So to very fulfillment Amazon XX% rate Fulfilled two and are center investments to areas looking of to and is center a adding

on side. have and that been what multi-year making. efficiencies again, So is we've getting on banking the last And the significant, investment really we the is infrastructure one, better which

up AWS the AWS customer. is only is for XX% A of see they're business, for our operating quarter. margin data You lot centers, Amazon based for of is not to biggest AWS' that consumer this who also the efficiencies our on businesses,

year. last money is only months, If centers, it you up XX the year, where leases, XX% the at year-over-year, it's X% of for we data the and end at trailing look up was spend capital which

year. the performance a lot up of have estimates with So I've this lot those a come cost of from areas that the the three driven probably and deviation

cost in business. are number across areas seeing So that we're really we happy performance a of great again the

you. Thank

Our of with Please May next Citi. the comes from question line proceed. Mark

on growth. Question the you. you've Thank seen AWS. Obviously few last quarters, in accelerating revenue

a difficult just something of kind not lot slow. also numbers I'm in recently? we've the still but of where the and percentage going sustain was dollar more XX%, of point that drove there Thanks. only growth to quite accelerating strong, you levels did on are growth kind quarter, it kind This sustain terms a where Or quarter maybe but be just of growth, will that? been XX-plus-percent reaching of in curious large

Yeah, your was. for We've question. I it growth prior bounce three around. rate thanks had quarters, in rate believe, is going increase to the growth sequential This

but growth very This quarter down, is slightly strong. XX% still is

billion that an year. time was annualized about are $XX We $XX above billion run last rate and this at

So we're from our been a costs. greater we gaining year customers. cost infrastructure momentum side, the growth very enterprise the on happy And the mentioned in with in very good seeing it's with the efficiencies that we're business, just

Thank you.

of next Nowak with comes Stanley. Brian question Morgan from line Please Our proceed.

Thanks for taking two. my questions. I have

desire or guide that course about revenue are growth slowing around with fourth revenue sort invest The the this which just the first quarter little the to revenue quarter a second the the year? of and And down guiding for contributors of the categories other really to your any Maybe about those can or need thoughts think largest you're you fourth driving other help potential Then et of the technologies the bit deceleration the to one, have been throughout one, autonomous of robotics in deceleration. us understand applied this specific you've partnering now players, that to? retailers Curious Kiva. warehouses of driving and some Waymo cetera. to countries

Sure.

talk Let me guidance. about

implies purchased since last the them since quarter QX was QX of has before the August guidance impact solid I comp adjust from quarter you XX% unfavorable an Whole XX% then, bought to of and fact in non-Whole foreign we Foods, be point growth year our point country. every Foods impacted that for last fourth specific the to Once wouldn't So it includes will first since that and for exchange. XX-basis any year.

So tight revenue year of the and even the that, Much for QX between quarter, factoring and high that have the quarter. year. window we not you, middle error only if our, for very the at end of looking bars we're November also but and the in on of comes very our

great to products our like holiday. for great would difficult We're clean. also shape customers. the capacity a FBA. always capacity to not are great we we're going it's very we're to to in have I very only So warehouses for We retail us going say feel What is for like have that shipping estimate. for The for feel but period

members. So should be for we're go. its very especially ready point, Prime highest at to Selection

will on the to housekeeping that And Prime from may revenue on subscription on in. more item over we'll Previously, just remember shipping So the prior recognition we quarters. we're how It's a on bullish there's straight This very fourth of and should based one year, to method. units. quarter. more line and done we see amortized took comes QX. tilted be you revenue have Prime on aware revenue quarters I say a, is had it it

you've the into we call. that push the X for that methodology QX, old X will and of up That but to the QX revenue but of growth rate has income reverse. again where prior That million quarter. in seen more is would caught and Under consider. again each So from revenue have a on you. had quarter quarters, huge we've both not to been a item the on is mentioned in operating revenue, income what is another for scale $XXX factor just it and This for

have to On the I driving. say don't on autonomous Robotics, much

the of have number standpoint. a robots It of are it's invested density much our us that people jobs additional the We and fulfillment some Robotics efforts greater better. to allows right around in of capacity. our much most on productive. from has been to the warehouse much intensity, to good now, think makes has putting addition more a other It but great our It return it benefits. We capital that makes product into continue It our program. capital our storage

Thank you.

of comes Sheridan Please the question Eric line from next with Our proceed. UBS.

talking With a delivery, giving the Whole more sort the Now, speeding question. up lot might of around Prime the Amazon taking about be unifying retailers making omni-channel, you understand of Foods wanted guys. to XXXX How much offline consumers with open efforts as and households. for investments wallet closer to thinking for XXXX about areas might of in new and as share be company? how we the Thanks that possible moving that choice should push SKUs up and and Thanks

Yeah, started think strategy on the to show side. we've I Sure. Whole Foods our

fast have in Whole Prime as we now an from You'll organic that's XX Foods. great U.S., see this products in hour out in even available using delivery of on Now. We're of also quarter and thousands giving cities customers expanded to Foods of expansion delivery greater as grocery in XX the pickup started Whole We've our grocery cities.

at the up customers the pick can store. Foods Whole So

that Foods Alexa. see tie we've started to You'll Whole into

You app. Prime then build and using cart using the out can Alexa check Now your

omni-channel there's So say, the to you business. overlap, as of, be grocery in especially going lot a

leave walk and formats. getting store On now as see, XX can that. the We we're Amazon in five concept numerous also, checkout storefront, course of in, selection Amazon. to up test location we're waiting curated where on of with you a bookstores, Customers categories want Amazon up opened quickly the top without across in six in a stores. they York items is great going bookstores line. the the Amazon feedback to a Go highly select the four-star New experimenting love of quarter. opened in We have We U.S. ability City to We're

to customer, the going be. experiment we're wherever with So ways they to reaching happen multiple of

Thank you.

next comes Sandler Ross from Please question proceed. Our line with of Barclays.

two labor some and shipping inflation maybe Any questions. looks might like costs I guess Great. see on, color in costs XXXX. it

centers maybe So that automation agree gains in efficiency pressure? deploying lot a than what there's can growth, you do current ones. Or square-footage XX% older the lot of then, things of to you the potentially that? some generation are fulfillment with do obviously the more And of offset a the some fulfillment and of you're

think reading color we be should Or it – into there growth how on XXXX? Is XX%? a a helpful. that would indicator not any good about is Thanks. So

Sure.

– think comparable to I first. last it's question

XX% think XXXX. XXXX that mentioned I the and is to the I XX%-plus comparable in

feet, about are if we'll of But whether may are be We indicator, cost, debating warehouse the two. sure from get We're not that cubic comment way we occurrence might believe gap but the in it, rate referring main transportation really negotiate impact you're efficient between that own regular we rate the other I to we work our hard U.S. footage internally probably material square of make and always switch a more on hard at the be difference USPS so to on the the changing looking expecting the bridge dynamics that transportation to is in partners even these rate a we'll XXXX. method. rumored Annual hikes increases cost. changes from and shipping not our the

employees, raise X being huge full-time getting did in wages, November and So, just issue. both and a starting we wage substantial will that of be XXX,XXX the a U.S. see we don't course, On as UK part-time increase. wages under and

be is factored guidance but that that QX quantifying our – factored guidance today, into obviously I'm will factored it not So into XXXX. it's into and

you. Thank

question with line proceed. Our of next SunTrust Humphrey. from Squali the Please Youssef Robinson comes

very Great. much. questions. Two Thank quick you

the in of very acquisition the quantify help you that on the help there. your strategy then under news, service contribution guys can on there First, And brand. that IMDb Maybe working the you offering? shed PillPack some reports understand suggesting quarter? is you us were light you especially any is Video much. streaming video more supported Can to just Prime ad an that, relative Thank

PillPack. Let closed in The me start deal with September.

let to them focus like needs question. quarter, start customer-centric So job the and They've a it strong. but impact our wasn't now building And second best excited a They're there. from material customer time. just excited, is the we're on highly we done with innovating are. a learning them on differentiated with how meet really right customer handle I'll working team the over Dave experience, very on to great management

Yeah.

plans no have build for Video we offering time. this mean, to Prime free at I think, I an ad-supported

Thank you.

comes Jason line with Helfstein Please of from Company. proceed. Oppenheimer next the & Our question

Thanks. Two questions.

have I I may think missed First, earlier.

the the value think of and of way think the important gave one And and then you through operating impact You are is advertising, is is the now you maybe business second gross just income, what trying you I obviously to capture ASC to XP but than of more and XXX. guide things as revenue much kind the people out profit provide. more question,

extracting revenue and So kind you seeing for value versus foot perhaps a what's your help to kind customers yourself? growth obviously of for we're – and the partners of if more there Thanks. can maybe way you kind us is of slower just

is Dave. This Jason. Thanks, Yeah.

impact, been ASC course the the that we've on talking it mentioned revenue quickly and changing, about Brian the subscription earlier line. year straight of recognition all now Just is

revenue So lower be comp basis $XXX that due change. you'd a on expect accounting subscription see to million about to

sales category around that COGS few that the XXXX. about about third services beginning reclass that in million The past we other in to have that the advertising moved increase here Contra other quarters, into piece quarter. the other talked specifically gave revenue revenue from hadn't That in was we is $XXX the

gross now growth operating Yeah. and paid versus the units And points going the impact comment potentially of versus would I – our steadily we're on profit, third-party It's your been up were quarter to up. in revenue say third-party. income XX% of up basis XXX It's year-over-year.

period. probably I that year-over-year So the on something on rate, a revenue impact revenue think the as large, consider since is growth of not is component to

it be gradual not an level to maintain over think operating it. that a to and also tried appropriately time. to is again, But we'll continue quarter-over-quarter revenue as growth I income we've factor, give big tends to guidance in conservative sequentially the

Thank you.

Our comes ISI. Evercore line from Please Anthony proceed. the of next question with DiClemente

Thanks very much.

dig to in wanted there. little Just the on advertising growth opportunity and a bit

broader sense us can close reflected you increase trying hopefully for ads what to the also And runway season, price help at should pricing a advertising, terms So expect ad ROI there ad the to your volume ad. pricing of advertising a we Thanks. Just are being holiday of fit the for in being there? higher If ad and voice then we in let's efforts potential on does along and for per in Is load? underneath full the heading commercialization, a get that the keyword of Alexa long about And growth kind your higher load? say, around advertising. lines any marketers then strategy? into into your

broadly talk let about little more a me bit Yeah, advertising.

customers. strong So Amazon as and a of reach want yeah, advertisers adoption Amazon well as we vendors sellers authors, number third-party sure, for groups, across are really to seeing who

still to purchase relevant customers have continue to new to is don't but a improve lot there that quantified of and and more the believe we options. we penetration, our room presentation that bringing as far As of you, for

So the usability that the customers, activities both at we're advertisers both improve side, being automate continuing so the tools invent same don't products make invent our recommendations we'll for advertisers, smarter advertisers advertisers. this side of to consumers we the product time. have with Amazon and for new on for help to work the tools we If as right, hard, think do and help goal

rate question general capacity, doesn't is we're but the that strategy in advertising. seeing So increases specific it know that the about I answer or

is this and Dave. Yeah,

advertising Alexa plans paid Just point, the answer is on have the any don't mean, jumping think add Alexa. I short to I we to

I lot two is the the of make customers' make or And lives in terms goal the things exciting is lot that a think and it month of clearly announcements really new in Go. we homes happen some mean there. that devices extent at you're easier in I to last a of and that, had in to convenient out the more on and seeing looking

think cool So few at we're the I recent look you options announcements, I of one, hardware to a you're if seeing bringing a lot customers. mean, things.

thing, getting delivering Alexa. I Second for smarter. It's and really more them smarter developers, service making with capable. mean, tools build And and the Alexa also for then helping

and that with I the cloud new skills, and new AI, introducing leveraging becoming all think she lot smarter cool So features. her smarter a really the gets making knowledgeable seeing more of and

even So really response looking far so the and those and tools to devices doing customer with those excited about more. forward

Thank you.

the Lloyd Walmsley Our line comes next question Bank. Deutsche with Please proceed. of from

put you're advertisers supply feel versus Thanks. how the property the you do demand can either much the side ability you and and/or Wanted your can just there's you just like than follow Any share a ads more satisfy? on feel color for demand to to get guys constrained, like up you constrained more there? sense to and tools provide advertising on in

sure much see we on I of is customers the how degree a mean look I making advertisements high Hey, we're site when for on and of there's usefulness nothing I those. Dave. specific. that in so at is mean you and what relevancy focused you this think position that particular

behavior to helpful and lot make spent feedback the and those looking we purchase so sure time it's is useful that And decisions. customers and customer a at telling that data us making of

and understand, are of out And it's things. mind the levels roll certainly out and so, sponsored various of trying to that in there, out or some but feedback that kind we're features, as always elements there, we testing the whether keep new of is different display that what

Thank you.

final Our Colin from line question Please of come with Baird. proceed. Sebastian will the

ones. the use membership Prime increase? quick development? in two And how AWS environments guess you services? business trajectory of you still Any is for price I for describe the Thanks. the this a growth Great. lever then, you. And change would the key Thank pricing core since June that

Yeah. Sure.

Let price me Amazon increase. the start with Prime

went strong, membership music not engagement, renewal that continue in very other that the that course, annual We're into up seen. and and Prime to video lot in both sign but of data data well see We Of the definitely very with our content, program and we've pleased May. effect Since in the then, a year remains countries. only and other just as ramp in shipping Benefits. as U.S., up, earlier

fourth set continue ability make linkage mentioned grocery member do using the expansion Prime we Whole we from market and see the Jack Foods and groceries tonight in in the delivery pick follow-up you offer Whole a U.S. of XX up have Football other quarter well. up you'll So here. coming pretty better to seen the than and stores, already that to couple out Prime the at Marvelous of cities more earlier in I to Hopefully, great when you'll Night Whole with QX, to Foods. Now a savings as Foods The Ryan we the Prime the home. and see soon get Thursday Adding season slate also The hopefully Mrs. Maisel you've Romanoffs content content, and things,

Dave. is This

services relentlessly, worked where the to lower AWS and form this, our web cost pricing Just the savings pricing structure look of philosophy prices. own I on When mean, philosophy. cost we customers can a just at in of we pass out take our reminder. has the on

and much very do our AWS to but it's we lower that. prices that's hard harder businesses, something to easy all the able prices, it's So to including lower be in work afford to

now, launched, months. times a including lowered few when the we last prices So we've AWS in few look more since at XX you

price So those pre-OC are for normal us. our a part reductions of business

your call will least IR replay next website, (XX:XX) the forward your appreciate and questions. of at on A today to talking the Amazon.com, you with our interest and quarter. through quarter. end We for in again be look available