Amazon.com (AMZN) 29 Apr 222022 Q1 Earnings call transcript

Thank you for standing by. Good day, everyone, and welcome to the Amazon.com Q1 2022 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 Dave opening be call turning to For Fildes. Please go ahead.

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

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

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

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

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

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

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

to regarding discussed operations, on the SEC. reflects detailed foreign events, COVID-XX results the spending, in chain commerce the supply and various SEC. the in with the uncertainty filings exchange by impacts and and filings in market our demand rates, regarding economic world of cloud Our are in and COVID-XX date may growth of labor including customer estimates with services fluctuations unpredictable factors changes online rate also those affected many of This and the our the guidance including constraints, our factors, the inherently be the our materially pandemic, impacts internet, conditions inflation, pandemic and of global global

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

for you this of a comments start the pandemic, current we're customer both environment. seeing few coming what on like I'd we're with call. to as inflationary joining cost the on operating and experience Thank in side today's out on the side

end range with of the increase demand an start excluding billion. net of in customer year-over-year, of This were Let's and foreign billion Worldwide $XXX.X impact experience. $XXX to guidance sales of X% our the top $XXX exchange. QX is billion,

Our compound annual the growth pandemic since what we were before stands growth at a than higher seeing before the XX%, rate pandemic.

and members prime member Prime the to high continue pandemic, key be spend rates. a renewal Our continue we have of driver members consistently the growth. meaningfully increased since start see to their of

Amazon We members also metrics. immediately customer ever the two added stronger reliance Throughout and selection the greater Prime quarter, seen now on millions not a the for Delivery Prime the by pandemic and since shopping new speed seen usage preceding past fast available the key approaching we on delivery. Prime's first months have widest years, performance Prime more benefits XXXX. members made early of for In quarter. entertainment. during their encouraging progress now we in is And the levels we've

costs, quarters. years. customer keep three these up the the experience enhance particularly increase past We've a cost and two protect to worked in with past seen to a large over despite demand sharp have We

much bottlenecks are and were no doubled longer they the our period, operations physical throughout this of workforce our doubled and we employees. size Labor and of nearly to XXXX. million the XXXX During X.X space

and two rates buckets, ocean year, of costs and which internally result of business. controllable much cost We'll primarily However, primarily inflation; be pressures higher haul and driven than break costs, variety were levels. our continue in driven pressures we a into already cost Line above productivity externally continue to in last these inflationary deleverage. consumer a costs, fixed face pre-COVID QX. The air throughout are intensifying at to second of rates or the shipping half the externally

the is of high in of to the at this contributed Some to Ukraine of due Omicron variant China origin, war fuel shortages impact point and the the in the has labor of and prices. start

pre-pandemic year more than times For added last to ago. costs when X.X the And is in inflationary ship billion in $X was of even year-over-year to than the wage with example, to a these Combined rates. cost of inflation, increases the doubled cost containers have approximately approximately year. compared higher overseas compared fuel it pressures incremental

state control to While and additional fixed for the will to and the ways these related consider within fulfillment to in they operations. we our our look costs, bucket working to we and network in our be will to greater leverage, we of predictability productivity and two cost The mitigate We variability. for some around stability more of be time. are more order of and look These reduce. now continue to expect force consumer correspond forward to demand which following next costs disruption years labor large patterns costs

Let's start with labor.

labor-constrained we environment. of in the operating XXXX in second As reminder, a a were half

we employees saw With network of these absences. fulfillment XXXX, cover late leave, increase on a continue in that in substantial emergence new Omicron hire to the to employees and the variant we

in compared approximately XXXX This leverage. last relates added we from expansion second the excess cost half customer transitioned we've fulfillment seeing returned being issue lower resulting still network, space quickly the to be business, As overstaffed, The QX. in our these made in years of seen on $X our and of decisions XXXX April, in employees constraint subsided our to variant are the headwinds understaffed strong advance, decisions productivity to have and and we expect and last weeks lower conscious let our into Capacity demand reduce cost and made fixed business. FBA quarter of being to to and from network. transportation leave, not currently productivity Despite we improvements we the in a the last few quarter capacity in the across year. In costs billion and early productivity. in

the During times but also were extended demand, facing And unprecedented only new pandemic, end built very a lead not high of capacity. on demand we the outlook. we towards volatile

patterns demand. have that to see better demand to match capacity Now stabilized, an opportunity we our

When incremental combine the leverage are of the of Approximately costs do capacity. We and additional out driven the rightsizing evaluating QX. billion for we of costs the of are our ways that to $X this fixed the cost have And into leverage. driving to focused and quarter. lowered grow last overcapacity, extraordinary XXXX expect we as year, $X normalizing, saw costs our operations, fixed in in this impacts internally cost leverage two-thirds controllable remain billion We capital We and these for costs, our the QX for next structure the year-over-year cost in externally control. approximately other quarters in coupled you inefficiencies. we of our resulted demand with effects increase estimate within you expenditures any several on costs persist get with cost these

in new segment we these $XX.X rate Bundesliga, an year-over-year to We Amdocs, of in that organizations of customer expectation Services. QX, net launches incremental will and billion governments strong Maple up sizes quarter represent all QX. and another billion not-for-profits MongoDB, enterprises the where saw incur Verizon, NHL Companies agreements costs an sales engagement innovation choose Leaf Developers now includes from like billion. guidance nearly to AWS. $XX sales annualized & were approximately service XX% AWS Telefonica, at Our $X of the Boeing, supported continue by in and of run and Sports Entertainment, announced and Thread start-ups Web and Amazon

and latency footprint to infrastructure quarter, in also serve performance. some customers. large support population, cloud continue to our our millions Local We launch of to XX recently centers, on United provided Last customers come the XX XX build local with the enabling more AWS' our regions expanding I to with the We States capital the near place our services of to across investments. IT millisecond zones single-digit zones extend build countries. of overall first at industry AWS edge completed best and detail infrastructure

me our with to that add current So, thinking. let

reminder, March business. XXst. fulfillment ended the Capital transportation. combination leases. at were but finance A CapEx XX-month to look is warehouses. center that sizable capacity, XX% trailing for supporting consumer primarily as investments fulfillment XX% we plus of period of the About little than went also First, $XX About is XX% supporting a our billion less AWS primarily on infrastructure,

the and of X% or things like capacity So, remaining shipments. to and The space related last-mile think of is stores. physical comprised so customer corporate that as middle

large in innovation we part, seeing growth support XXXX, we're expect do AWS. year within to full spend the infrastructure year-over-year, grow rapid in to For

about represent of We should investments expect in our capital XXXX. half total infrastructure

earlier, For we have capacity to some the the in need into. consumer network that currently grow said we business, as I excess

brought we've down of in ago, expect That be prior XX midyear. to there so are capital that we made Note decisions can build the year. on build said, versus XXXX again limitations months our So, fulfillment adjust projects the lower many expectations. XX on to were we dollars what spent

to also on transportation to expect We be capital flat projects dollars spent down. slightly

loss a the few highlight billion I'll net $X.X an overall quarter. items. of reported We in Finally, additional first

loss that of this I'd net our billion, $X.X included investment comments expense Automotive. focus our in we valuation loss point includes from primarily While common income, pretax Rivian in on stock nonoperating a out operating

had gain on QX. that $XX remember a we may billion in You Rivian

financial release. of also quarter provided our We earnings our guidance part second as

in the As first to roughly a included getting half of that available net out their continuation countries became sales half homes. readily reminder, vaccines of many QX in and extraordinary our began in That quarter. second as the more period started XXXX of moderate of comparable people growth the

note be about the Last in Day Prime quarter, our occur third XXXX, that July Day in Prime XXXX occurred event quarter. year-over-year growth this Prime In XXX in contributed to basis Day in rate. QX addition, year, sales second will the to year's revenue points specific.

and step-up you other from operating expense largely restricted QX wage quarter. reflecting areas, year, to employees including receive questions. as our a income inflation stock-based $X in This expect annual reminder tech your that, workers. guidance, up that high-demand approximately to our QX, let's Lastly, in stock-based look the engineers compensation billion employees unit our we as move as billion, retain second see hire With grants stock at and see compensation on will $X.X expense continue of we in seasonal to in we

Instructions] Mark [Operator first Our with Mahaney comes question from Evercore ISI.

Okay. want ask questions, two please. to I Thanks.

there for of couple of last In implies years, Is to weakening? between if and would than revenue quarter, particular QX. X% your I any you seeing about margins think you been signs the June sequentially the look or typical? sequential non-COVID has on at Are And the be if cause the X%. briefly then guide the growth -- growth the and terms factor you X%. it lower that softness for back be of sort look years, And

got year-over-year implies these guidance of in just you incremental about quarter, that but billion decline, kind year-over-year of bps. sort the $X explain March So, a of your Could little margin in billion $X same XXX costs you Thanks. yet kind versus the bit?

doing? revenue, very you the kind guidance the about commitment, seeing, benefits last and are our usage, Day right year-over-year we comping We're And of cetera. Prime quarter, year's year-over-year big now. the of levels step-up to elevated does we've of we're the being strong. Prime How On part purchases, of Mark. that the what lasted last half we're QX. second in then continued used, Prime is given strength of move comp is part of et Customer that again, best revenue demand seeing yes, remain view Hi

is when seeing not a prices have excuse We're to -- current times environment we're -- people they great that has selection and on of and impact the the time of softness. lot household come and So, cognizant consumer and Amazon inflationary because me, it we the or know budgets, a convenience.

the cost see in we on We So, this definitely demand it it generally of don't ways. But side. macroeconomic forecast two the factors any one on see go can side.

second and was the some the of question And detail think Mark, related I guidance operating there. income your to

persisting of Brian billion about, pressure higher pieces, the lower guidance as productivity some the fixed the aggregate, X pressures, we've talked deleverage second expect Brian like about So, buckets for quarter. see, first But you in the $X said, and QX. said, inflationary that you for a number of time but to given cost detailed into

unit just and will as be specifically those generally some improvement variable see per reducing buckets aim that we fixed about. we controllable to at spoke in some costs, Brian other areas. We're working cost cost kind to of and So, expect lower some committed productivity, our of those levels to also to lever have where

end this compensation mentioned opening again, that towards other see -- there the The -- to expense. stock-based step-up it Brian thing in seasonal of

employees So, to we see in our quarter. year, the recall $X billion. expect the that approximately grants of received expense those second RSU This

And first $X.X the billion quarter. so, about in that's up from

next of Our Bank with America. question from comes Justin Post

and savings transportation versus XX% costs. some then, units Big probably And think just shipping you about looks sense see bring How But price Is is it your do pricing? we during costs FX you're any can are And -- the about a picture, been you savings we costs delivery of there. that know lot input how input around the When Amazon flat, you makes you you shipping up of units, of they're headwind, really higher seeing flat your through? passing period expect look but seeing in-house. in increases not a to Thanks. lot And through think passing versus inflation. how second that about I that? question, do a units? as would when in-house, through are start hasn't there? think with you like a at do costs high the

Sure.

to first. me And high from we middle our May Let on that to held for in If from pandemic went rate we from step We world make the next XXXX, saw almost XXXX started last to that and of year. growth a this a essentially of units May month. rate a comment the for the XX% lap of middle year the essentially in -- back, then, XX% the will revenue growth overnight first from growth. year end a it we

And step-downs year. in hit middle noted so, May soon rate of run the last I the as as

that to lot range, from -- units all during jumped people to of to XX%, pandemic. buying a because the jumping tied -- mix, to and were gloves on and mid-XX% So, agents cleaning units of product grew though, they XX% mainly instead the things the more the

lot mix transportation you aside, -- mix putting because asked to that that rates. a data mind -- keeping look you with there's issue. So, of about the the But a have there's all unit shipping at in heavy question

not it's necessarily shipping very to Our to that. providers -- transportation rates loads we get handle We we that beyond we've versus the would of had third-party external are are carriers. have seeing what and in savings capacity competitive, seen external would the last And from even couple the from years.

network, we cost It to So, our our we're have effective. would we able day we -- really deliver one-day AMZL as not glad it if be third-party that shipments, just to one-day a try be built and with shippers. same have not we program, would

the productivity essentially a area. So, transportation versus what and I've that the the on in growth seeing inflation the you're to costs in hits component there growth, on shipping unit side, mentioned the little unit but in that factor bit you of a

energy of Justin, inflation, pricing impacts cost haul, and of our costs the pressures and as about shipping of line supply in larger talked not we wages, utility side disruptions which on we're the supplies for inflationary your since the quarters fuel centers. volatility the see of operating start some on we've and shipping see second in Ukraine we war some data rates, the chain in quarter. course, last also recent ongoing some talked AWS well. some And point immune to about with in the regarding We the inflation,

on to a customers. of competitive sure pricing, make sellers try costs in for you customers offer of reinforce environment philosophy pricing pricing Now, pricing for We product and top I price low hasn't and to that just we're look aim great terms our delivering at stay and changed. when

to For our out competitive means really to that XP close in data. reputable business, staying be space that the continuing that relative with really to prices there competitors low and the on

set third-party For by price third that's that don't party, sellers. control we

we services and for them other as businesses they're own that also costs that And environment but well. course, in their their with to to on staying better adjust and help running pricing get sure with pricing pricing information to top many the of of another sellers, only logistics, well. handle they're on offer not So, services as we'll other inflationary make account

do still for how sellers. We those their unclear it's the can fees So, related so today out help ensuring increase charged competitive and persist. and -- effective, there. costs is versus We're the wherever fees surcharge if believe, inflationary But we down long up by sellers addressing I them, our FBA that. will are of or costs did they'll go we and some on, focused to and permanent course, some there

than supply and fee change, that of rather first inflation surcharge the it's, time permanent that's it's used a like fuel that broadly a there time. across first that but are done we providers we've this. mechanism the chain out And So, implemented something course, for already, the

question next from comes Morgan Brian Stanley. with Nowak Our

taking Thanks I Great. questions. my have two. for

you Brian, about day. one First to one, want ask day, same I

in Is modeling be there of in should line that Kuiper year? through to item a I in content, it's tech anything little our for ask want it moving SKU in and other second same where data? Now that for And on What one, perspective seeing inventory it a you're you inventory selection day, one getting available back are from based your whether coming get about tech content. you more sales demand AWS are about the or leading or Is sort items we and else as pre-pandemic. costs cases higher really the to thinking an incremental came day? selection, It to despite was in some that elasticity lower.

that a set think noticed one this of things dime, sign. I trust more even we're -- see trust on first and that -- I doesn't to I I store. of up in to we it levels short maybe you okay, stock. to same approaching order may as it things see that store Let had it's and the service to question in you before me a you that's go say, -- a a and pre-pandemic, stop and to a going Amazon day doesn't consumer, day. on as to more have But consideration it turn and period opens get Yes, time. And And positive the start I it I with that, your run continue the my then think myself, for more about you had and first well, and first

So, it's start over a But It years. expecting take to It -- we're hopeful and prepandemic? that is that weeks it same be to good time. we built and has that will add to the elasticity months. elasticity, see takes doesn't hopefully,

point, the technology second and On the content.

a data is you components from initiatives on. there Amazon a Tech AWS things. the those of as number the equipment, and infrastructure, center-related network The Tech costs AWS rent that everything reminder, Just got to website working other servers, dotcom in depreciation, the and costs support employee of types technology utilities, we're so and and

estimated lives related a first for to should year-over-year, partial it of growth servers, for QX was include offset, in impact quarter. related than under For a the XXXX down say, billion you of was up a which rate, about throughout $X does, to little useful QX, That change XXXX. XX% see little an which though, was offset what bit, growth course, the year-over-year I less in

reinforced I investment investment the areas, In continued it, terms in it’s tech of infrastructure. the just just

-- as course, to AWS doing there. other build-out areas One and support AWS, the Alexa well consumer then, bigger the inclusive speaking, AWS, teams, and team and broadly that tech the some And Echo devices certain remains of just of support the of as headcount is pieces there.

Doug Our JP question Anmuth with comes Morgan. next from

Thanks for the question.

chasing in you're at about no and, you're the or in excess actually fact, at talked how moment. physical staffing You capacity longer running

productivity how hoping it you of to fulfillment So, cost the efficiencies could long bit in network. regain could a think and the talk about little Thank you. take some you

them, began X.X operations. productivity. thing. me, -- We with ended quarter million course, X.X start are mostly billion employees, million excuse with of Well, Sure employees, X me in essentially -- let and of most the

we were and of work the end that quarter. of the had During to quarter, million, X.X a by peak we able down the

work demand ability combination headcount. getting at Amazon call certain the all And employees. contractors So, the transportation our a employee the me, But and part, up. we the adjust level, node -- blue network, it's are -- a most on productivity of to have It's capacity in we level. warehouse of at right permanent badges harmonization now, employees and of and also productivity matter right but productivity level with the the of the the what or for we matched having and demand right right the the excuse

made bit back, So, two, that's a and And sight warehouses we're the we're Is of next Okay. and but line And on. the prepandemic what to good to working and last of Go we also working the way. question? or in that's half we've a what in that a not we're good rates in that's see on the second to all the and ahead. there strides on, quarter -- focused month, in way firmly transportation. getting

Our Goldman next Sheridan Sachs. Eric from question comes with

I if a the Thanks minute. on for hope And taking the for just you're capacity I could, both issues well. question. Maybe sticking

of of expense on lingering might a costs that But the cadence periods? issues versus headcount it knew half unpack first are prior logistics called already COVID number in very the much out of you of employee that Will following where billion Doug's keep be, the you a how the of wanted you Just front because issues build terms you of the different the $X When to out asking that above had So, prior little fulfillment year? of beyond center towards the you build out, up holidays. question about have of versus 'XX maybe entirely stack talked and and and you from so part talked from and and front calling that of is the year, this to asking bit about And you're beyond now above the back and a and of to is then, maybe some permanent transient build there's question to as before. had billion part the half $X look standpoint we cost differently. that first not guide. versus the thing billion for we the into the move typical years, much. $X the and cadence some supply Thanks through part In yourself would back chain can first we the additional QX find capacity as build it this excess at that of QX, year that with the QX we build into year capacity a this versus mind? so nature just

thing. questions, Good Eric. Sure

me with the Let penalties. start cost

in people was creating much we billion last in $X From has. cost issues right even space XXX less had when network. the shipments, a to hold as labor, billion full our Long our second our the labor leverage least our months is it the all we hired fixed They though and our uncertain have overstaffed year. super late would we'll that were it and We in of having then in didn't but XXX,XXX we're was we standpoint variant penalties Omicron we -- last in it still cost here, And have Omicron be the to different. into of kinds half labor and standpoint, leave. We consequences XXXX was drag of were added, of productivity were mention were through warehouses. much -- second a be of our on workers labor, of be found within I anticipation deleverage, network. half I that a we QX labor over the So, able and carrying couple that issues subsided better lot and space. probably environment with on and were quickly, it in quarter. of in disruption And that lot half plan, chasing high chasing certain certainty the some trucks, prior for rather having reaction it enough where believe, we not QX a zone year $X having year of that because labor did that a the ourselves at more And made QX, was and would and with combination on negative That and people that volume when January. principally of indicated from of of

has the is from productivity a So, conflict, by will last the both but overcapacity transportation happened It QX, QX, in will inflation -- to Inflation fuel take the get but time And amplified back It Ukraine make costs issue periods. to great the the it's we been bit spoke. not labor. Inflation so we full has losses billion on believe which -- since strides dissipate. was in in costs, on full switched that. that been following we especially wage that in in It's last year. remains we there. will disruption don't the $X

of transportation, now, we rates and at have a mentioned the fuel. also So, like we things, the cargo find were year. little it's more unit believe, a factor -- those beginning to shipments of offset will for the I longer Those are hoping some than and per and And real, less we costs. will costs persist those ways fuel of or to transportation use high-cost

So, that. we're working on

the and be go QX. Prime we inventory surge in we both, for year, holiday this glad through there's only cost have and see capacity deleverage Day that's narrow fixed big in definitely the the QX orders, guidance a we'll when is will As of then always really we But what as progress, and that season. because we hits

come the of So, way very we years. we tumultuous a two will see out as we've -- it

decisions chance We made a to a the we we past our years. made to have are glad And more now pattern. demand normalized capacity more over we the rightsize two

as there the well what's through some really cases, not and see. is So, will to ways that's what we then, sellers left inflation, to some and so on subsidizing in having evaluating to costs and and there. third-party finding we're sales pass mitigate of we're And that working

XXXX. to year-over-year mentioned this So, volume the we're in that again, it's improve I like Like, literally, has of But, two years QX of growth expect second the we passing from in not higher high half because, of super comps XX% XXXX. year the before over revenue revenue the XXXX from receded. of where to May year May

So wouldn't growth normal the in and difficult it revenue it I more and up way this comp pattern. be the to growth it's up -- resume think is rates it But went stayed will full now about a period. by

question comes Sandler from Barclays. Ross with next Our

So, impacts mostly started and invasion. guessing member how there the conflict inflation March the versus lot. And fuel revenue after geographies? noticeable trajectory volume But about and Prime on some Ukraine in a across letter between I'm any difference any before non-Prime? your costs the mentioned post the comment is the just mentioned. Thanks compared it's

differential. Ross. year-over-year period, year Yes. very had say the kind would we to because strong. the a But to Prime of in We last I hard Hi It's stimulus sequential March there's lot what height March compare was from March. a payments not strong non-Prime States. No, versus of a of thought was very consider some we be United

are else. ripples consumer indicators food, no demand, because in -- wary fuel it and there's when part are everything budgets doubling ripples big it weakness costs through that we're of a it So, companies through all of as your we're probably but of are household seeing tightened

continue is of times the a and get experience delivery on we'll customer lot increasing cognizant period better dimensions. you're be But is the to and what to better on our that. we're which experience, customer So, time making of than pre-pandemic selection, great focus

from with final Our Oppenheimer. Jason question Helfstein comes

questions. Two Thanks.

bit? a talk Just then, about you growth share comments impact disruption supply there? was this And there's second, Are any think Thanks. I backlog can having backlog any you last chain advertising on any can AWs seeing advertising? asked. Just versus numbers don't quarter. If on quarter you AWS

second one Jason, take first, backlog. Yes. on I'll just the the

period the increase see yes, customers continuing what So, we AWS. commitments the AWS mean, billion is, the that. March we're for backlog long-term I balance of for to At making ended, $XX.X had It's right?

of term life kind is the for year-over-year. about And weighted X.X those up years. that's So, average remaining XX%

revenue growth revenue that's on compared XX% and And to year-over-year, excuse rate -- the a run strong was me, rate. up revenue advertising

So, we're is customer team use been advertising point at it to vendors has pleased and advertising by both, sellers performing others happy how they're way our reach where and considering purchases. valued with who the the very and and base still the

quarter So, out the new and a to payback strong us. investments and continue with on and products to increase analyze their manage ability calculate the roll advertising and to for new marketing sellers

website for forward least today on questions. three Thanks months. appreciate call on we A to And Investor quarter. for replay available for you will speaking us joining interest. at Relations the and look again your We be our your with next