Amazon.com (AMZN) 24 Oct 192019 Q3 Earnings call transcript

Thank you for standing by. Good day everyone and welcome to the Amazon.com, Q3 2019 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.

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

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

to of Investor Olsavsky, today Joining is Relations. your Dave Director and Brian us Fildes, our answer CFO; questions

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

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

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

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

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

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

differ restructurings to legal additional from things services, our demand that our accurately settlements. therefore goods results business among guidance. It’s assumes acquisitions, don’t we also could possible actual other conclude our guidance and for materially and predict not any or investments, Our

we listeners to that, a Q&A. our Operator, remind how move please question. will to With initiate

Thank you. [Operator Instructions].

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

around for I question. little the for guidance revenue the could much wanted Thanks gave so I go a in to QX. deeper you bit if taking know framework

the QX rate in look in have you QX. QX, like seen many deceleration in your Historically, but year-on-year businesses they reaccelerated QX of growth over versus

or things tailwind was e-commerce QX? So just AWS think business, perspective, keeping advertising we whether to in whether of so things of we be pieces the know there in it as or headwind in a mind the moving much. of some a or are wanted through some should from Thanks front

to additional We let great made clear, well are Sure. forward feel me great holiday has great we ops where Hi, our looking Day we Eric. a make season. team are had like that’s we progress to on Yes, getting going and a excited customers service us think QX. in done to for a shipping. rapid One be a have in great job and really The I as QX and position a

I On have here’s front, in mind. keep the guidance you what would

of over of you Soup, years. the in the and and the last this for which couple a years back few look Whole acquisition last adjust If obscured bit Foods

on been in of drop QX and has XXX There about rate, a points. generally the noticeable QX between run basis lines

season the that’s few weeks We bit year. of tight of the the very we’re versus growth that a about something that’s rest this differential are season, the numbers It’s just the holiday in expecting. large factoring law and and of year, holiday between

many time X% was QX it in the bit our X, quarter, years went to with of and expected October holiday this based the ago, Japan. at tax also a that all there’s saw last was up we’ve a on we slight and and was year. in QX in, Also India was XX% Japan QX last raised a history tax Diwali issues. negative of year then two and impact the QX that on from in So The consumption consumption factor in end bit what in other in we pre-buy the a tax the from

we of growth together, rate. year-over-year those an XXX by will QX. going it’s wrap our you headwind points say helped be negative international XXX points with more in expect issue to I has a it if be QX, basis basis and in So us would of

XX as For There QX. headwind in QX the points issue. it’s to in XX be company, an favorability it’s of basis large about is about basis expected not and point

So bit we but are more QX. really forward guidance, little that’s again on a looking our to

our make for customers. it holiday the I best to think well ever we’re positioned

think new Day may forward have September a shipping. looking AWS and we���re to side, Vegas, our seen in announced you in with Conference welcome help XX,XXX the holiday I We’ve great got Las re:Invent we should over where attendees. conference One device lineup on

you. Thank

next Our question Anmuth JPMorgan. proceed. with from is Please Doug

learnings Brian, wanted been ask broadly Thanks what biggest months just of for taking to several availability? about have the past far I so as Day, been questions. the over your you Prime One you’ve increasing kind more

And should about into Thanks. how we availability season? understand playing your into for that’s heart the you we income when of the help and And get guidance that us operating then holiday how can XQ? think now, also just

Sure.

Let of start the with second me that. part

expense where QX. our that that to Day grow, essentially that QX, said were actually on in guidance. an back hit One put QX, and So In estimating we in guidance we to expected expected we were in million the we I tied we and we above just QX, $XXX into

there’s is cost additional a costs, in and and of what’s the essentially as lot capacity, things billion of added transportation costs, deploying tangential expenses the So which just shifts transportation QX, cost by year-over-year the our inventory $X.X customers, for a we’ve in head nearly our a penalty the adding warehouses, closer QX we way biggest expanding poles actual is the to for cost cost. shipping, into transportation of like on

One response guidance customer our pleased So we’ve built that to QX Day. into very but we’re the estimate, with

in really done to the us and has to unlock team for here revenue it work this Once see capacity yeoman’s in our also can again growth create You additional daily. acceleration continue ops capacity and acceleration. they our unit

to will a again customers QX. it help great be that expecting We’re in

members We a have to that help as in real also increase daily seen must they them so orders, their lives. more, spend their see Prime it

you. Thank

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

was day you Great, maybe guys thank Day, you understand so Day versus a Of just by couple Brian, which much much. sequential XXX ones. kind shipping. us I of One you point quick think help growth, of for said a record Prime basis of can just the was that you driven how acceleration

the into going to versus latter. have going you’re QX Just trying to obviously because extract only the one other,

there investment a on lot And that? side. way higher least in do just counterfeit around the driven you is to the then for higher of for is Can at – by you that a that? the OpEx also part you. news Thank on and to quantify And us if XQ combat help whatnot

sure. Yes,

on catch algorithmic put we of So lot second products. and learning one, certainly into a of that on a we We the that, put effort I trying of machine we’re as effort, effort well. human into diligent lot to lot would put counterfeit say very a

the bigger investments in two-fold: One the mentioned. say QX I around would just I Day One certainly shipping that But are

AWS. on be would other The

in continue to invest We AWS.

margin progression savings as was time That excuse when been the at last QX, it XXXX. at was were forward investments me – look we business, that infrastructure a operating high the efficient, in banking we XX% of our we reached you time had QX. very some If mentioned in of a in it from

more also line, about to feel really personnel, only new good we continue products and we to you but increasingly year wide we this and force but business, that top a sales an thousands to geographically. of not We lot know mainly and customers, the handle of investing the in line features wider in a a to of add bottom continue marketing are expand group products, continue group year,

saw impact capital line, QX sales last biggest infrastructure, a extent, look and year-over-year basis in year. and tied also in our this X% was which AWS So the if grew the it to at that a segment to secondary year leases on to related XX-month or leases in equipment we year-over-year marketing XX% of you costs QX trailing was and that

higher step in So demand. there has up support been usage infrastructure the to costs a

QX, So probably essentially, see other year-over-year, income those that’s operating continuing of and that’s shorter element the we trends prior quarters. into in than

Thank you.

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

Thanks for taking two. questions. I my have

are go sort structurally? to in think of to are Just costs, costs versus I’m appreciate portion how some about the color. back the costs I hear transitory One like curious these shipping of there. about there sounds It what Day you to

they what do to Day going have get Can about steps, talk to think some Day, shipping how and you to sort just used how two Two one take to the to of One the years it’s closer you costs be long for over to the next take? you to of

Day, think sort timing on I it’s think secondly is how U.S. on And internationally? about then mostly if that then you pushing right? And of more do Thanks. not, One to-date,

the Day Yes, internationally. we have our expense increased in has Sure. selection been U.S., but the of most One also

We’re line bottom that. But also starting impact to the would lift I so see some and U.S. benefits say from line both the is the top in cost on far, the biggest

forward adding inventory, run into we have warehouses, deploy pull we’re costs the Logistics, we cut-offs, shifts, can long-term You those inbound temporary capacity, will as be. later have One hit staff still the Day multiple about One so like Day AMZL that, here greater get learning structure cost know know do in we that things on to Amazon new know you we go what short like up the as set We things centers. sort costs times

working whole to we’ve in would drastic before through and Amazon you So history. this we’re number a know do different and incarnations that road it’s down obviously, the of – and topology you a know network it been to glad change

know posted as you but keep So will forward is on a, really guiding best QX. for right can, we we now, basis quarterly

Thank you.

of line Our next Terry the Please from question proceed. Goldman with Heath comes Sachs.

been seem infrastructure on this. but of the One is your all I thanks. more know on of most part maybe the based bigger that shift the would has seeing, vans last focus we’re Great, to the speed, on mile own of Day it

of way big past? and of relative to you going accretive it people where was using utilization, hiring fulfillment, third the accretive you very almost the kind And to Can you prioritized? of that margin where or in exclusively also retail, they relative have give AWS for you, get of this know you levels XXX,XXX in scales been As sense profitability quarter to become efficiency does then us a higher parties a that the sort and those have understanding are people.

Heath. your questions Sure. Thank you for

many places U.K. already In On the percentages, down Yes, for are with in that. be that we high out competitive options long cases question, we’re for some instance, type to be, delivery cases will the the first it AMZL we there. whether I have are options it boils alternative we will term think and other very where doing. of the lacking we we’re believe

the party carriers, have third to own in a fueled by we’re large the carriers used capacity, of certainly long in with past. But our run we’ve combination helps going both that

we partner carriers, for program see small fill a developed that we’ve as including businesses need service role all delivery the fact this spur So in to help well. help to

get now, But yes and adding start-up but some be time going will for density down, certainly and other cost the in new cost on structure is our improve the capacity. to side, route paying it’s over there things

XXX,XXX investments transportation way mean teams we In head especially in to On as it, into this close but I in that are part this year-over-year. biggest question, and roles, is QX. that of we’re XX% additional said people the by capacity Day. the in pointed certainly past we the for driver adding that’s to QX One service as headcount add technology and to and people fulfillment yes we time the increased up you a transportation

you. Thank

Our Ju comes Please with Stephen Credit from proceed. next question Suisse.

thank Okay, you.

that can it this So Brian, launched pretty and with potential the When like dollars. and sold I I’m takes engineering time. was if the employing it greater for on puts now much wondering you in seems on weigh the margin AWS? But slow down incremental over of marketing you hiring other hand number itself should guess first long-term are and a the the talent salespeople, on

you I’m out. on what’s wondering or Thanks. just in So if coming weigh in coming what’s can

form the say our – and will to margins along price pass are reductions reductions we the effect both of will of price competitively in also would I customers to sure. form pricing the continue in absolute that cannibalize expectations new that the products ones. Yeah, old margins in and

our negotiating or XX-Q, know to at And you you $XX AWS we from if is we shows that XX% out on that who what renegotiating our And see up we’re future that’s it customers commit long doing price AWS, decreases in look point then have incremental also customers commitments increasingly disclosure a us for year-over-year. billion term. for and

thing see. short-term So it’s commitment, not also we commitment only another but that watch, the that’s to the long-term

of believe I lowering rest are that infrastructure If we the the some P&L, and bottom costs On again of and best, people in industry. we up efficiency see best the driving not have, the line. there we in our the continually

we The sales be, go scale. confident we and to chasing a as bumpy be we’re get say as that marketing you here that and we we will investment, along, will know large very opportunity as are a cost but that leveraged fully

love, and continue these that will their customers then invest SDEs the said, to our side, respond you and software product you in build know push inform to and will we portfolio. technology that And on continue or to products demands, engineers as yes

Thank you.

with proceed. question is Bank. from next Our Lloyd Deutsche Walmsley Please

are Thanks. about $XX key in drivers think press mentions that, Can users Stick of the the you you Fire I million now release the acceleration what to like worldwide. and revenue other talk within related advertising looks

within Thanks. much So this advertising inventory inside is the get about strategy. been of networks you’ve to kind meaningful overall able ad maybe can and you how to how of talk that

let so on with question Yes, start the first advertising. me

higher grew grew XX% up biggest rate thing there other is that XX% and last is and XX%. advertising this So revenue, advertising quarter than principally a in which quarter, the at advertising from

very helpful and these progress advertisers. in attracting there, find are we advertising see and vendor the to want happy third-party empower increasingly the customers it’s advancing our new customers, to on helping with advertising for focus continue we sellers experiences and them engage businesses popular to business, to So with products,

focused the use our point on So to we’re that to relevancy, at and making relevancy. that, we helpful ads this better is and relevant and do learning and us are what helping that’s it’s to customers, still early sure to customers, really our better, drive machine better

Lloyd, is then Dave. Yeah. this And

and Edition Fire Just products, new fact quickly new TV introduce to did that Bar, TV. XX the recently the Fire – on the Fire includes so start I Cube. we I first mean TV have Sound with TV that Fire

a number of recently. have So out things come

there. excited really into get We’re more come to customers’ so hands, to

continuing increased the some that, on opportunity we I think side the advertising and specifically see with are to adoption.

areas for of we’ve brands. Fire is You offerings video through like TV, early in know space, IMDb still adding apps things Live OTT with apps, expanding said really easier it access one of our our done TV inventory Services manage It’s this focus Amazon Sports, supply and better more and third APS but more a or party their results. and as campaigns few video and I Publisher IMDb things streamlining advertisers through adding OTT and making for for integrations provide to just TV,

we’re the again the So, lot excited improvements yeah, said as progress a of that fact there. think these the really opportunity community, I think but days, of engagement the with I and devices, early of I device with

Thank you.

Devitt proceed. Our comes Scott Please from with next question Stifel.

fairly the two the expanded? would Day Day has with has broad-based others more you. There consumers is paid been the meaningful reacceleration where Thanks. you or for unit in a that of Prime the guarantees response customers, categories I’m in One past responding highlight and categories the product quarters just expansion certain in One are if over Thank been wondering growth across

Scott. Fulfilled you clip. and last Yeah, has that the a unit been I growth at two quarters growing reaccelerated yes, growth in actually the what tell Amazon higher unit Hi, is is can

it Day. attribute So to we do One

broad sales across We’re categories. all seeing

for in items the ASP over been threshold term. we’ve know is So that lower right some last over spurred been has there we separately doing that items, that have some again customers, but especially for ASP decision months lower the the six the some in reduction think you sales long

you. Thank

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

and of level know question, generating related. and of this go you competition? anything to When more Thanks. of third is, referred referred space, Brian kind by part it’s to – Hey, the about about out bringing that you’ve back I prices. price thanks, asked traction getting in in it. had a going down building of know seeing application I stack and the all to Are terms and you what broad first interest but And software talk shot a the take to the in Could want enterprise, different you AWS. your you at you first into into app – your up going success AWS more margins,

Hi, Mark. Sure.

as my we much It’s a a price really comments price say pricing as competitive or around for decreases would certainly seen I mix see competitive that were we’ve pressures. yeah, market number years. So absolute of and

very very long-term and to is everyone lock on sharp So AWS pricing from commitments their up is eager customers.

you We do is capability and price that with know it we a unmatched. of think combination

bigger is the less are the of element old that cheaper around services products that and than So ones. us creating expensive and new really

is there against. So issue bit that mix a certain always of are up we

again your penetration, think know enterprise, the making great you enterprise progress we’re on But in question I there.

of they it’s know revenue than migrate. growth, be and sales to willing other to companies to hard cycles or do some it’s are to quarter-to-quarter, before others and some the hard that enterprise You the going of fluctuate are have going faster migrations can to it’s some work the make predict pace on

we’re of especially there’s on or the market. enterprise having know of business, representatives, factors a success force you are great there sales we play adding the lot and sales for lot enterprise So but at a

and Dave. is this Mark, Yeah,

plugged and to I listening and around, emerging, breadth of in caliber depth getting quickly mean think ourselves really both the that we faster but in the in customers, pride in anyone top, side, technical question as your lines been also have. and are high us people that the the has as communication understanding really really just sales to service in long than that’s quickly see feature people issues for AWS allowed open and are really really we else, I and Just that that we terms since having innovate on terms really of stack. and of

looking the out a and keep roll to for. focus really making of is lot are that the sure of services spinning, So, flywheel us that continue customers we great lot that a for

dictates our to we I what and kind to emerging new on sure whether that’s our So largely just and it’s be ourselves or solved. to cusp of areas look and stay think needs autonomy availability roadmap that give that customer need really pain points making technologies the or of

you. Thank

Colin with Our from Please Sebastian next proceed. comes Baird. question

Thanks. could the wondering some own are the network or the give you and portion the for delivered I’m a U.S. drivers partners. is your first and Maybe logistics follow-up sense if SKUs on of side. of U.S. orders delivery in that in through now us

then Amazon products some specifically And have an on tied to that suppliers, merchants is Amazon occasion reports secondly, for order. not been there or delivering other is or

view capacity as excess road So just and on you down another get you side? opportunity as the wondering if this potential the Thanks. logistics

Colin, the across I’d operate. we with the you with, I third it’s point, where our relationship – we that think terms in know start Dave. think for great capacity party about carriers countries Thanks might have Yeah we how a know the for second got question. you On we’ve hey of own,

small are deliver items carrier making internal know it’s really from also or things AMZL focus look grow that to to able able Over party capacity in time but XP great the medium-sized got transporters Amazon I is also but to available first the we’ll volumes world. quickly sure serve volume we’ve on our our those realm, Logistics, carriers, expect partners we to around to continue the ensuring resources, and grow orders to using and XP we’re customers, that the you our our But with think be receiving whether businesses and from be our or own able reliably.

you. Thank

Lynch. proceed. question Please Our final with Post come of will America/Merrill from Justin Bank

Great, thank a here. to all; you couple be it’s going

to going Amazon? the Just overall quarter, holiday you wondering anything a think that’s to sales in do back headwind on specific the be for season, shorter online

about could and if you. platforms there Amazon, just on environment. third-party competitiveness the other for that sellers. on about see Thank secondly, then you think can comment for that And thinking wonder how I them and on the Are comment their do regulatory at you just you if profitability all? opportunities you the

On would third I only the yeah. we say Sure, if party party third sellers succeed succeeds.

So invested in in we’re us. them they as are heavily

adding So both and set for new of are as we are of that us features economics our a well you we know we products constantly investing and business and on cognizant we want works their behalf, and fees accordingly. their

out as much think increase participated, and much I – that I’ll also So that sellers else, the One as XP Day, point with the as One we’ve have anyone know Day our offering. and you in not as

So, it’s sellers a as for as, great boon in program. our well particularly been FBA

not is there holiday Christmas question, November December season the shorter somewhere XX in generally is going know certainly holiday budget in that Cyber holiday Thanksgiving is we November dates the between anticipating Monday maybe - XX, and well that What are spent Friday between X the the Black On know a found important impactful. and period. and and be that we and period you that time that you past to Day are move of is

is there the purchase move know You - around. to tend

in moving delivery very the just early later and been and before in quarter as count have them holidays. quarter, moving end receive shipments of have higher quick faith the in customers can on Some the some the at

So guidance color, anticipated that in we’ve that’s that’s bit a little what’s our given.

appreciate your joining Amazon with quarter. look talking be forward to call of us you again questions. today the on available and Investor will our for We interest next on the your at the and Relations website, in end replay least Thank quarter. A through for you