Amazon.com (AMZN) 29 Oct 202020 Q3 Earnings call transcript

Thank you for standing by. Good day, everyone and welcome to the Amazon.com Q3 2020 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 Relations, the Dave I Head over remarks, Investor of Fildes. opening be call turning to For Please go ahead.

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

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

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

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

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

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

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

significant the customer the COVID-XX and we world many our on is the our be including foreign and dependent of by economies in or pandemic, global taken detailed response including various and events, governments, businesses numerous the results scope any also in control, of employee are Our date This the individuals inherently not the as to unpredictable reflects duration spending online on including pandemic consumer guidance our spending, highly factors our of operations, and by the creditors the in on staffing to the of productivity on economic pandemic; of factors, with may effects including: cloud in impact regarding spending measures; SEC in growth filings and sellers, that actions well conditions SEC. may discussed and as Internet, and factors and on economic activity, estimates affected our ability and recurrence; impact workforce fluctuations materially those with services able affected in third-party continue and suppliers, the exchange predict and which filings are our regional to changes and pandemic operations patterns areas; rate the commerce rates, and be and demand the to continuing and of the global safety uncertain. all

other not acquisitions, among differ and services assumes, to don't guidance. materially over I'll our conclude also legal guidance call Our and any actual to Brian. things, possible settlements. or restructurings results It's for demand our business predict now from turn that And our accurately the we could goods therefore, investments, additional

Thank who I'd extending only for our also These great you all you to than for to pandemic. global spend than during a million of million XXX make partners. employees more delivery of around to hard of year's want recognize recognizing more to compared XX% the over medium-sized a two-day that's employees Prime sell the billion thrived the like who to start our I sellers Many what contributions by who for the hundreds our will than businesses success, Amazon folks to Prime businesses joining and But and small Prime to world. Day. all on more on are takes challenges work this it us well-being of safety world, worked today. partners thank are Day continuing members whom our customers ensure not event, this who With in Prime the to thank one Day also around year. the to last own increase serve their of up thousands third-party hard and facing store. Amazon and and the sales $X.X big continue

from share Now quarter. some the highlights let me

largely demand Our trends consumables, we the our second QX demand globally we reflect including product growth continuation when a sales quarter. The in saw media. exited categories major of results and softlines across hardlines, strong

stream customers Prime's they to We the as Market last is Foods with year-over-year They all video to more now offer continue from categories member we to In sellers including doubled to stores. more in international available pandemic grew Prime which digital by pick QX, our offerings. options QX, also our and renewal are year. XP the member customers of rate sales XX% greater sized continue comprised to Whole quarter growth customers. video. offering small online important as customers for of mentioned Internationally, engagement. the in grocery number our Prime usage of more year-over-year. medium to grocery including who also grocery and on continue and improved of part Prime continue accelerate up content, And the reaching We're of watch to business continue and continued members hours with third see expand QX convenient just rates than Prime be more largely members Prime strong than began. we before I across Prime year-over-year saw Prime who compared than to in video shop more their frequency of benefits

XP to of quarter we've unit half our revenue. volume sellers revenue overall QX. this online With support FBA XX% services a strong continue XP record mix report we unit XP in seeing heavily to units similar seen particularly investing sellers COVID. increasing units that faster to to return half Our growth than as of of year. We're of are FBA, to over a this the stores are to pleased sales sellers stores represent and in as million total to over mix prior in percentage grow total continue as

more To cost logistics stepped employees to the as in shopping customers This largest relate the stores. well portion process facilities continue Foods to incremental course QX. COVID to expect XXXX In our billion employees in allow new to facilities. facilities our our total, first employees including PPE safety and quarters at for includes Market of approximately revisions partners $X we've in to focus new incremental costs social incremental The three help customer in support also we employees strong $X.X as well-being demand. particularly added of of of This has safety other and continue We to on distancing than and enhanced productivity incurred and and ramp cost fulfillment the and these large in up cleaning up of costs in of for billion headwinds ensure our and employees investments influx P&L. our related hired incur operations. and the and to our Whole

guidance consolidated income top end Our our of range. and the exceeded operating revenue

related the income I growth network strong as higher good leverage Amazon with despite [ph] quarter and advertising. As that quarter extra and the operating in And us With performance than transportation demand saw centers volume in higher AWS COVID the leverage another helped well of our in in to strong our achieve remains profitability. revenue operating cost we logistics, expected mentioned. as fulfillment

buildings capacity expansion the to network in of rather as some Once guidance. fulfillment in More meet in up strong open, drivers two headwind particularly QX our a for Although QX We this in QX in profitability opened be able network. we network QX of important prepare felt in in our this transportation and were QX happened than we in they I of our headwind and QX. heightened this. network will growth rather QX their new than to because is we more our reflected out up pointed QX thought few demand shifted had peak. short-term ramp it weeks

we leave. part month first great XXX,XXX QX with these that such leading the about people I note Amazon's hired QX. a plan First, have $XX and welcomed parental already more time in added pay industry just insurance, We time including demand. the wage to permanent and of customer health more minimum permanent employees and XXX,XXX are in full lot as strong and XXX(k) benefits will jobs support

billion year through nearly billion leases for $XX including Secondly, QX. months XXXX of been capital $XX over finance in and investments. nine CapEx a this first big in has the We've invested

to As and last our additions be buildings to finally, expect QX. centers includes late which QX centers year our this logistics this quarter, footage XX% Majority approximately half I more the be customer as open facilities. will stations. we fulfillment significant our on fulfillment grow And into transportation side growth strong. sort usage these by remained transportation network mentioned delivery as in square of and in AWS to square footage About well opening and of

move to plans continue see companies their growing meaningfully We AWS. to to

will we're three-week unprecedented Prime While go demand season. extremely from let's our across our looking strong have year holiday to meeting Annual forward our conference delivered virtual as now a October. customers to needs grateful ready gearing Amazon With several We're the months be We're Day employees move this Conference. free in and as well for that, XXth. onto up of busy This XXth who Q&A. a November re:Invent running to for on through December reinvent

with [Operator question. your from first Please Instructions] our Morgan Brian Stanley. Nowak question comes with proceed

Thanks for I've Brian. question. two taking my

seeing third-party about year-to-date the to then maybe learnings that hear think the talk first fulfillment of qualitative in of sort of good about Thanks. you the the the durability improvement think and product leverage to you're logistics and per of scaling and you Can launched drivers how the that just curious about in in in unit service how other about fulfillment that center fulfilled I'm cost the and overtime? I countries you to mentioned this The throughout saw UK. summer the one us quarter. think early to some just secondly, globally? from And Amazon delivery quarter

cost be blend since of came our by been back for the high on cost to first some say that Offset question. would them in mentioned really of that center itemized. all we've COVID employees and May is the some and week Sure, really fulfillment or Brian. in part leave. very the going I I of leverage, related Thanks your of strong Yes, running of consistently unpaid been levels a second

delivery fixed is of are at again order our the high pattern has created because dense routes our high assets. more strong favorable as Things leveraging lot demand a consistent volumes. being leverage consistent and that like So very and cost and

So articulated like efficiencies. elements social we're steps again breaks. we increased and that extended network. safe in people keep distanced to some our delivery Other Offsetting facilities, is taking distancing, that productivity our see even transportation things we've in

any Amazon working always to is think efforts ways have on, with develop we've much say, other don't going and on what Dave, we're I on this share got [indiscernible] sell new packages And and companies work that just reliably. of innovative I'll to and I to we than of can and quickly any customers and small gets The medium-sized we help including that businesses these support. programs includes with testing businesses shipping to

Great, you both. thank

next JPMorgan. question question. comes Anmuth proceed with Please with from Our Doug your

Thanks income back appreciate for taking wanted to to Brian go questions. the your guide. the I XQ there. operating thoughts just

terms bit you're it a It billion feels increases beyond the in the perhaps dig little kind a deeper trying Just thinking square and headcount. the still about there in not incremental beyond COVID cost. of footage like of more maybe that $X we're about how in thinking some there's

in to you've if of done the you've cycle footage it's know obviously XX% comments of curious square times increase early just I but any tend with year this investment XXXX, at and And on CapEx So investment. and ton a terms you there?

you think forward? you adjusting how out as kind go that Just of build Thanks. about

coming last of One and is, Brian to QX capacity QX a mention on have QX, that's so when to that tend heightened question last of that I lot to Doug. leverage orders. in to non-peak demand Sure, the another fact source far so forgot especially excess before comment, we his

whole lot fulfill concerned in holiday is As there's generally uncertainty a that of up be certainly spending year's this saw guidance that far in year. QX. to of QX. We the come things our lot would generally orders election in think We whether XXXX, of disruption so holiday can some host cost have an as again, bear there's issues to come a uncertainty to normal from around what issues I

of of in saw those QX those really us I and on into think the a We QX from we've all causing fact lot of top range. is that QX. dwarfing our is good some continuation line trends project uncertainty COVID

added so again. a is the Some mentioned brunt of in of you We'll and factors capital profitability another negative people the the the October more the we far. investment foreign in people that lot investment. quarter of then people XXX,XXX as last We see and of had

have So not because and period the highest of margin of this shifted generally, we there's of Prime that, there's QX. generally the the usually But Day calendar that into time period dynamics year. because that's the deal-oriented really

both and and We through we're into carried people the rest have facilities through included of We through and quarter. it in really built entire our now capacity are Prime the carrying it carrying Day the quarter. it

in probably December. quarters occurred you and maximized more have that build and would I other think up seen have end through October November gradual in might

I So tell on again. that's you would holiday what

caveats, We why have question? I'm so we it. uncertainty go around things And and wrong, so our your range sorry, normal a repeat you that of could there's lot second could put that's and a right

perhaps you've up you just given really about investment XXXX? stepped think in how build that on XXXX the Just forward CapEx going out

Sure.

have at are in grocery, by order higher delivery like would I things and match overtime think every at some we things of volume. invested the and that investment capacity

So grocery our delivery a customers. to for our experience intent is great deliver to continue

is did one-day was our setting that forward. year lock pull Yes, the to middle up year, build bit especially delivery last been build little expect a this this capacity year. us of have logistics So of and a rolling for as out big that we we out

pull demand. forward from bit a XXXX this the year satisfy into we So to

space demand. I is in other match think we've you're commitments locking way long-term But really - at to timeline and and good hand out adjust capacity one on the able the logistics being or in up team to the buildings. in

a point. the Hopefully we're and side err We'll having has think will better as not It and it to that's year. in from the the dealt next shape It's challenging capacity insulated get close to this country to play we're pandemic through I we'll any cut the holiday much too hand on been We've learn But adjust keep variability. we're reactionary the as think we at we're lot at of right very certainly. call. got and QX and a this customer in anticipate of and point this that year. more. be it's we trying it trying and globe

Thanks Brian. color for the

question. Post next Merrill Justin Our from Please question with proceed Lynch. with comes your

is same shift to grow online thoughts us and the customers natural could volumes Great, COVID home help you aided can on just much a the kind your that? of at cloud? recur year? at headwinds look How or type how there's from the can XQ you understand and incremental then question you there's thanks. environment, I'm quantify. for When for continue then of you sales some Any of transaction more do by think And unit some next environment. demand best guessing the being of maybe the much of it are work recurring that lower

impact on So and and both will year? next there is could if that give you. it any cloud could thoughts - how Thank you the us COVID retail how impacting and be

Early household maybe lot buy and good engagements. year disinfectant people bit of on seeing a by ups But of much that and people problem masks. a groceries will Sure. year. to are other this not of as be have to It's supplies it, that there's of a next number we're bubble Prime as hopefully demand that hard went were of wave I followed there and otherwise down. That stock say that buying predict. gloves phases would been to wipes a going

going So going up up. Prime and renewal the it's our program. rates is strengthening The are engagement

They're that buying program kind bit there to trends be more we and more open will stores volume on So our of We of the for across connectedness Prime our more and will of people digital benefit. to there's value. like to think people more are store imagine. frequently up categories. back using from, and more lasting leveling I things buy options have would a the When

especially like been So bit think good. pulled have we pre-COVID - from adoption probably - our They've on the trends from thinking curves the a things initial forward delivery. are been forward grocery pulled our

are second and lot now bag with A year to in question a moving the very mixed the and now different hospitality are a There's plans. on and right we're entertainment. performance a gaming, some customers Cloud this going because we're pattern happy faster are in holding industries really and who companies like doing It cloud So cloud. accelerated things seeing middle down. anomalies their conferencing, and on lot pace. to of and travel in is your video of learning, remote tied well like cloud at the are things things

So of cut I majority expenses. though would ways for the down that are companies say on looking to

to growth of with dollars It's we've right contracts dynamics through each deals multi-year sales us. of largest seen of drive standpoint. gone state industry and good of and customer we the the extending period. a way absolute cloud, value cut cut therefore, can even benchmark. is of our we workloads to help the the to short-term best good short-term them to the good save their during their about good connectedness those it we're Going their the in with that again bit. strong the companies The different backlog costs despite this But going do force tune business down for feel good long-term. up their has is ability and seen again the tuning be and this from trying down to some year-over-year We were our usage on and quarter We've To and think on and quite for growth their that ever long-term. them now. us expenses is helping cloud actions a lot Certainly dollars by doing and a a state customer in will

is just you to can that. And I'll see, add Dave. this

payments some Also to called good those get recognizing more number planning on governments in [indiscernible] significant their commitments are their number carriers, engagement of online transform for learning. tech, see and of of seeing and innovative. and with others. global Schools nimble universities technology customers can You need

lot we can So there. with of help work a to customers provide

On our from a design product the processors. momentum with perspective, of we're AWS GravitonX kind significant seeing

they're others. got T Amazon the and like newer customers and many XX% price SmugMug But realizing instance families. [ph] you've ECXs, better there's MRC So the from to Netflix performance up

xXX-based GravitonX you - compare design AWS by ECX Amazon that to when all families instance our powered So Those with new our are processors. instances.

So really there well. that with what in pleased we're as seeing engagement

Please from Sachs. is Heath proceed your from Goldman question next Our Terry question. with

thanks. Great,

Just much of be growing is you obviously the at around to of capacity lot we a that season think with you'd from? discussion holiday to during an issue being a of new capacity that become normal for growth what point kind infrastructure would this how way and utilization going the levels the should the warehouse this seen of third-party to And couple about given your been What bring you back demand. wave sort a be necessary are advantage How announcement? CapEx shipping is then competitive fulfillment own that we've given does networks you and capacity things, where of of the limitation you the to investments delivery there's the holiday? consider your as see going see that do and of

start here thanks yes. with that so. one last [Indiscernible] Health. intertwined Yes, I'll

shippers. as third-party about of bit is feel ours. to with as of CapEx half in people focused are well the expanding a The rely quite third-party great third-party A mentioned shipping, that partnerships and on just our good lot on hiring around also own capacity going We that that transportation. you our that, we've do globe the be transportation. invested we're their we tight will and know capacity shippers we We've

of grown to But that, companies order think advantageous year. levels, we've year. year. the we're specifically customer tight been and will fulfillment that capability it's said our QX. going So CapEx our customers. to we lot of year needed again that for continued all regardless able it and this it we service next early area. CapEx our probably develop implies this for and that get transportation I the this because order going be what people be to logistics for everyone best and We'll good to to going see it's it need the to in infrastructure to in feel a Having to XX% We we've usual pattern see and to we're again excellent do expansion On the do and stretched

CapEx will hiring multi-year start focused of that we're and that. right the we'll we're But be now probably on just giving for guidance where period see, So QX for QX.

It's have able utilization. might seasonally certainly year our Your tight QX been up of QX any fill capacity question to capacity lot excess and excess. been a in that this on very we're

simultaneously. feel get work in it and that the really QX it and a adding Prime for Day As of into performance had holiday. to Lots feel add and of everything in up. we ready we're good excitement on We using continue But stepping good go. test good top to that. We're that and we around we and we about shape

Mahaney question RBC. Please is Mark your with next proceed question. with Our from

fourth structural Thanks, quarter, them think there billion profitable as some question. in two How that's view the about in sustainable? they as questions get expenses I a built Is quarters out row. we at reason sorry, year-to-date profitable nicely Do Secondly third like? you or international overall or segments one-time-ish just network? please. that? to for And more you increases Are these reasonably one-time-ish the to billion think $X should two want really been $X I'm or

a revenue any lot. Thanks growth can give behind other The color accelerated that? to XX% you

thank you. Mark, Hi

with start me question. COVID Let the

So $X.X in due estimated we of $X to in that to expansion seeing to is operations. around billion closer QX expenses of we're The again, the have our be majority and our QX. were billion

that new hire our in can a social that process is look this hurt extending like periods, productivity said productivity for So ramp, quantify, has productivity. things we like break drags There's things that. distancing, things change

are cost the things related would are that. There's more cost so around those to - direct cleaning say. testing and have main and also I We those calculated supplies,

well that to show that should is pandemic that what believe cost that these is to for our cost and don't will do that recur. the trying what over the own knowledge be So incremental soon, is is, capturing once as by as hopefully these we intent these we're these

know in that certainly QX marketing and everyone. year year lower there's our It's on in now. expenses. starting QX come requirement a lot There's some marketing we this trends. but nearly back benefits We ground expense in in to because to normalized We this see more There's like you had Okay. QX internal year. right levels parts $X not need simultaneously going things that or of to travel's a of halt, the for do billion travel saved on travel, travel to

like at resume artificially get as things later won't maybe year. the But there's a So and will as that same there this be low the past. levels date to as not

So that from we're [indiscernible] then cost And they offsetting other best point might level demand there. the such of netting although and in sitting the are we're fact and high periods. We're transparent the favorability's high can costs running the we're seeing. some COVID they're as consistently that offsetting be we peak really off trying some of on against extent not the to I'll because that a cost at be level to at

been efficiently. have run warehouses very able to these We

fallout condition. between split issues. more to discussion the assets favorability kind penalty from the there's But running have cost then on the been certainly COVID of some You related

in bit and will Europe Okay, volume you so strong it. an last quarter. you We're I if would advancement profitability. that this on color hopefully a especially very I in Japan. of think International volume discussed segment seeing and say some our in countries gives we and

a structure. So putting future we way volume maybe onto this cost year's in

seeing we're investing in lot dimensions that probably expansions. like you're So internationally the US things like international. like that of benefits, things in why I of see why things generally ahead the say to is starting still profitability Prime a you're would is international devices,

and UK have like of But course of and places is India high after that will. of just a of Germany we right in because particularly Day Prime and lot that a pandemic and continuing But There's going so the think and continued we is you segment of about profitability seeing investment the You in I factors and level we right now ahead get to a should committed volumes creating might very the Diwali Sweden we're leverage anyway. see competing the international schedule had launched we're the the that on if to good strong even off we've yesterday. it where that and seen start internationally. including

was comment that is strong performance very Yes QX. in and mostly essentially third other The revenue. getting on had advertising advertising we

and just continuation we So that earlier trends from start a budgets see in had We that to the of contraction occurred the some advertising in QX. increase of saw QX we had about lot more turning for traffic more and estate find good brand our real to traffic selection and for we customers do valuable that into out a job and discovery. of advertisers our

what you're So is most other the of line. that's seeing in and revenue that with strong advertising quarter in

from come Eric proceed UBS. your will final with question. with Please Sheridan Our question

Maybe up can. Thanks I for question side. question. on on if following taking the Mark's advertising One the two,

how the to sort content comment video the of both little all of especially original the medium you globally membership. continue past. that terms drive your recent How that does to the think do invest consumption in just product know see second advertising. a to what the of Prime on give video on lot be side opportunity years we guys and against within seen continue see inform Prime in when much. in Amazon remarks opening of you about of to the offering evolving a Brian advertising us around sense with the advertising, Amazon coming loop in off You ahead? you've innovate back you bit Can And programmatic the consumptions and the you help question sort would Thanks so

Yes, on advertising. I'll great. questions the start Eric off with

ads easier is, on site, ground to Working I of ads more targeting. Sponsored these easier and sponsored focused to we're and Making on being for marketers, very platform. we're space main brand about just usability making getting set agencies at to display smarter up. So But our registration some use. tools and focused sponsored relevant to simplifying here aren't probably surprising and demand our bidding just increasing priorities Amazon servicing too the also ads, you think then a site on product customers.

to working [ph] those so products then be areas the that a a these understand we I is you video in going apps of new areas other We're a We IMDB and ways certainly the serving the been with opportunities to around, brands TV, space from to unique offer how we've position hard various pulling So brands of off advertising Fire and with video on sponsored good ad momentum think one interesting area. another [indiscernible] impact TV. developing services provide stores Video, lot We're some help XP grow course, that's we're are all and some number supported help mentioned they're measurement that. in on advertising and that's inventory of there. them able of focused brands, working seeing Twitch OTT their of or business.

of next spending future think our learning good much on year that time like some priorities and and sense I the lot what initiatives where we'll a in good focused those on. about you I of momentum say of gives of but won't too there. kind we're look

job local the in producing high video, then If on see overall quality by Prime base. smaller so especially we've we content from free region. on to we US that when do that Prime our We're globally mentioned question with in member around know seen channel renewable well they and Higher to world. do very goals we many our tier originals We significant are, when - engagement into that that each augment and more then I self-reinforcing a it as that, members and we deliver trial global And fresh more rates sales in new doing step we turns your back higher top countries QX content that rates. specifically. and engaged in membership they as a that, conversion higher acquisition And it's loop. the Amazon show

during performance period. So happy we're with this very video the particularly

than We're it. worldwide know the to places have Australia, again countries value in found the territories that test members have think and which in I have and in chance Mexico, content really look the localized people gotten XXX really India, I UK like really as countries [indiscernible] customers seeing benefit Prime think appreciate. much you developing out more we're in past, given in really another Spain good those maybe and content interesting Brazil, and some

today thanks talking interest our your questions. Amazon for will for quarter. A in again website be forward We on to least three replay call next and your with we look for you for appreciate available months. joining us Great, the relations and investor at