Amazon.com (AMZN) 27 Oct 222022 Q3 Earnings call transcript

Good day, everyone, and welcome to the Amazon.com Q3 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.

For opening remarks, I will be turning the call over to the Vice President of Investor Relations, Dave Fildes. sir. you, Thank ahead. Please go

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

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

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

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

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

may SEC, press our our During certain this release, filings of webcast, our call, website. each with on which this slides we measures non-GAAP posted IR and financial in the discuss accompanying is

You with comparable regarding will measures of measures. these including reconciliations find non-GAAP GAAP these measures, additional disclosures

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

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

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

joining Thank call. for today's you

our Before will the we QX. and comments for outlook about move questions, performance make QX some I to

For net billion, year-over-year, exchange foreign of points excluding sales worldwide the in third an changes of quarter, increase $XXX.X XXX impact representing were approximately from XX% unfavorable basis rates.

dollar our selection inputs strong taken sales that driven continue work customers customers. accelerate We've our remains on to now improving of more and of for in our incorporated recovery basis offer during the XXX had Throughout the exchange than the million, continued was we point This focused highly the our strengthen continued We ever. to most, to initially quarter. approximately have quarter, QX which $XXX speeds, the ensuring foreign guided on stay our quarter, pricing growth we into our sharp matter to impact than higher widest stores all impact headwind a to. rates, guidance. while that actions in-stock As represents driving helped we business the worldwide the delivery and

QX Third-party rate. points they percentage act sellers on more history. highest Prime basis XXX consumers, We QX, Prime our worldwide, and Accelerate, quarter selling offers It's for Amazon's net important even our approximately remain contributed than This and better small in analytics hosted stronger celebrated for Amazon and million medium-sized which offering. our with conference e-mail to members. XX% marketing rates capabilities, and and free-to-use US understand from sellers partners, making And where introduced we tools, representing big event was features ever. We it of an up shipping software including shipping most recently total businesses, in the content. units sales XXX build whom these the eighth discounted offer July, we're XX% Day to strength products biggest conversion-driving are help sold a last growth that new paid in offering working of in year. members sales the our of for new partners, of purchased Prime year-over-year Day Prime to items QX new an

reminder, a XXXX. the Prime As occurred in of Day second quarter

ever. in XX And the first NFL premiered history XX Rings We and more the driven of months biggest Thursday more also viewers The Power million largest Original. since the two September, of its Prime Video its than of The global Prime driving Rings its day. two Prime the other Amazon Football viewers Power more than in US in debut of the Rings: attracted during releases on three launch, has Lord broadcast, any Amazon. hours Night million sign-ups also sign-ups averaging of than globally first first

kicks the few broadcast, the next of the Our hours, visiting a in off seventh Buccaneers. XX-game the schedule, Ravens with

where exchange have billion. of product. the grew AWS, excluding foreign year-over-year, which sales of year-over-year, QX, We sales net annualized increased products, In excluding to vendors now sales sales run awareness XX% to a the of advertisers our impact representing in drive of up general also offerings an advertising build and/or in rate of foreign exchange, and specific as $XX.X billion growth $XX XX% impact portfolio good and allow saw sellers embraced our

to chips. and our us comparable in XX% better them August AWS economic delivered our service shift East the announcement to to costs. fleet-wise. an AWS of customers performance continue customers instances region breadth recent AWS' AWS with footprint in machine and in Thailand. of throughout than to uncertainties, we things storage that processors periods AWS AWS recent of ECX uptick the uncertainty. do help the region focused the breadth and instances. history, especially we're to learning expand to the our tiers across in like launch just And we've depth, customers new move continue to optimize, xXX-based macroeconomic infrastructure IoT support cost on to GravitonX controlling teams The Asia relentlessly done offerings we've expand working depth Graviton in of Pacific AWS workloads launches And to seen work enable launch price proactively And including as With Middle and lower-priced training help ongoing options

Now, to income. operating let's shift

During income. in the we operating billion quarter, reported $X.X

represents had and cost our quite during in our Turning America we the higher North solid international generated continued productivity transportation quarter, leverage billion and improvements first fulfillment quarter-over-quarter, by networks. segments, cost fixed though driven to over planned. improvements as as we improvement operations productivity of $X our in much and not This a in base

still during cost but continue a efficiencies the and improve opportunity drive by encouraged quarter, made of the our productivity networks. are to We progress throughout to lot recognize we there's

We the and have hard continue identified ahead. see to initiatives improvement in to teams on, that further quarters expect the work we

Another the in premiere of of Video launch the the impact of and global package step-up Rings marketing was income to and in costs NFL Prime the States. Football by Thursday United content Power QX, the Night the driven operating primarily in

were results charges negatively such closure Fabric.com the and by impacted to businesses Explore. products of non-recurring related as Our certain also Care, and Amazon Amazon

continuing reported services. billion enhance certain net QX, second in and primarily was We This geographic to to to income existing services invest to overall professional iterating billion invent and from AWS, quickly forfeiture product their in money, regions, developing also Overall up a transition We builders in continue businesses the to increase driven customers on headcount help stock-based new We're adding our ramp quarter. in stock new capacity the $X.X to awards. and meet in compensation infrastructure to more cloud. the new investments save unvested was services needs, sales estimated quarter. by $X.X $X.X in and in up billion expense the of third quickly reduction expanding rate

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

impact we've investment to in this As driven is stock recent Rivian's the statement price. fluctuations our income by quarters, quarter-to-quarter in noted of

Now CapEx plus leases. combination finance is the equipment of investments, let's discuss capital which

$XX our technology year what with And of in we estimated represents full which line billion fulfillment incur to continued This approximately spent compared we is continued expectations to demand. expansion increase this is AWS XXXX, $XX XXXX. offset in with reduction the in investments an capital capital of transportation For we've as expect moderate billion broadly investments, and our infrastructure, $XX primarily approximately approximately in align innovation billion build in and support rapid to year, last to year-over-year better by growth, footprint. to an the

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

their have progress as impacts purchasing broad-scale of While heightened sizes technology across energy The consumers worldwide. organizations encouraged fuel rising sales power and environment their our impacted continuing and prices by we spend. of all challenging evaluate and our the remains advertising macroeconomic are inflation, growth assess costs business,

our earlier, and growth As of we as expect mentioned as businesses saw fourth well foreign the increased across moderating third the progressed, quarter. I persist quarter currency to sales headwinds, many throughout impacts the these we

take where our the on better faced businesses aim certain down also efficiency balance our believe at kind care them and of our and economy and experience that companies we've event, customers the accomplishing winding times done for strike As of And in our operational more to we're customers and right or uncertain driving improvements taking discontinuous customer believe between investing an including actions best our are they some the is hiring focused. that to We belt, for double-down When remain to efforts while history, resources have we pausing similar tighten less. with long-term, with products best. tend spent in the services where elsewhere. that

Early heads-down a our customer Question-and-Answer lasting fourth than to believe first event ago driving And We into value the of customers. season is create great from reliable ready of only our for the we that, we We As to let's members Prime and with questions. this a on shopped ordered putting head millions holiday tens way focused XXX Amazon's million sales weeks Prime off first-ever remain Session and on season to few more we for with the your a experience, Thanks. customers partners. items quarter, where are shareholders. move selling kicked Access make fantastic

you. Instructions] with Goldman line comes up from Sachs. open Thank Please with of the Sheridan proceed time, for now we At call Eric the question. [Operator will first your Our this questions. question

that or so AWS e-commerce US the business changes with optimizations Thanks AWS in implied the of on either respect to side? e-commerce respect lower-than-seasonal question. exit of some Can specifically the with the you a US you the for respect I'll help ask better around revenue velocity, Brian, to taking the the two-parter how QX to and the understand made might be to or trends on us side QX. in behavior the that Thanks comments seem with business for some guide just guide, consumption the inform, maybe specifically much.

thing, Thanks Sure your question. Eric. for

slow in it in But the a but was But tied we're was due in in coming investments is crisis with been Ukraine QX to a to in-stock back. a Day back, like enterprise now. I As It there. really for making but to speed started unfavorable primarily that when consumer we slow FX talk it AWS, QX, working continued compounded What in to lower our than look a to Europe have is it the favorability includes guidance it's to to impact, reaction of points And are come a bigger was where US, and year-over-year. it geography. factor delivery recessionary North issue rates to XXX a in slight ahead issues and strong globally. the on income. exchange. internationally. the This resumption and us saw with aside business, about moment. biggest I think think saw biggest rates we tougher right bit. customers still I individual starting the that international actually foreign customers was for Compared in July dollars war it America, Prime to is bills. a international. is And of worse the we've going really the things And started for guidance bit. that put growth has environment great revenue strong, The be yes, our energy on that But obviously, a basis to impact mostly through we the in quarter, stores growth their was

that lower I to cloud one when it's market. the companies, points spend they're is with all into like they uncertainty that's faced fixed Just valuable cost in would variable real about say want turning great computing lower cost of our their have ways and customers, get spending services through for them save or help and still performance money we many chips. GravitonX There's alternative them help that to either ratios. we their many

do you about the in what the really short is last term We a the growing the really to run, QX, business, even consumers business of are billion had the $XX $X.X clip. in revenue short were good the their that in and see mid-XX% money the we So growth billion at we've of dollars and AWS, quarter, a would the absolute the some base added back of we're cutting the say save we so although excited for noticed we rate. both to long the in growth end had more for run. budgets trying XX% quarter in I rate

So out, re:Invent the to but assumption. about that's generally not up that's sure to fourth how the conference that through going late play we've forecast excited We're carried coming quarter. November. our in We're it's

in Las and XX,XXX people over many tuning virtually. more have expect We in to Vegas

value lately optimize drive is for to their a budgets for in ways to as additional them new with services customers shaping products, what tough also, economy. new and and, continue manage up So

Thank you.

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

taking Great. just restoring to seen cash back, step question. likely as for ramp with path think has you the this AWS flow? meaningful Can ultimately been about to always we've that you recently year free talk Thanks in centers the and what the the tied cash but last Amazon's and year past, CapEx And Brian, negative do and flow went focus transport? to that fulfillment Thanks. generation well. can free similar data

Yeah.

these is cost, years. look the of is it, still income before to in we’re the multiple here. and things that at the the in I XX for not about lot months network doubled last trailing X.X drop-off there's months our think factors on versus free over you One calls. we've flow, cash if that a XX a Ops our -- driven talked

do and optimization, to While we there. we're strides in making network productivity still work

in chain back lot of to unique We in the to too. out company seeing of our about on of a of other with cost supply have thing of now Asia coming going with side having the our demand. and we're mainly and we chain levels primarily This operations. a cover. think additional just in a get we due because is the weeks quickly and model of the have So pre-pandemic mostly structure We areas of have to lot issues more customer our more stock. right inventory weeks to sellers, reacts supply There's cover equation,

that our the accounts flipping favorable what have and is that driver. issue network, had, to CapEx So is then there generally high a into XXXX. two year, doubling the very we days the that payable last a CapEx working That's a of as been the we is capital than from last more inventory. And we We impact normalize years. expect again, big move had

on budget business. increasing focusing dollars increasing customer our from AWS really the demand year-over-year. You'll or while for see capital that of our XXXX customer originally and thought for capacity in CapEx still demand lowered cut we've stores one-third what We our about probably we business

hard And versus we're those we normalization we So working of spend, intend our accounts efficiency in flip dimensions. cycle recovery the all numbers and as expect, in a income CapEx see payable on we inventory to those around. generation,

Please our from question. comes of next proceed Mark question the Mahaney Evercore. with with your And line

normal lower little of than two compensation were of the ask a then international AWS for those the thought. employees Thank for new about also what we year? in margins you. normal thought, that profit heavier talk Is those that And stock-based questions. drove also the a impact granted the we were just bit just new me that a is little margins? that losses. to earlier reflection segment? than have Let quarter losses AWS that would And Is full

Sure.

start AWS. me with Let

with profitability. margin we commitments, investments by business, renegotiating to they a offset sequentially customer as which the broad pricing headwinds fluctuate a data deceleration op margins The or we disclaimer versus productivity see increasing is time So the that balance drive in centers, long-term efficiencies on our did drop AWS quarter-over-quarter. over and will in all as

lately there. moving I'd So what's say yes, parts stock-based the there's happening is, comp.

particularly wages is heavily have year inflation and seen Czech AWS. in our on We our this in employees concentrated

We're So than had in pre-pandemic, seeing they element pricing. also materially costs gas the and it. that higher one of energy natural that's impact are electricity of

have more prices years those of about the than up So Xx last over couple XXX degradation contribute to basis years X ago. point and versus

mix business. for well, established international that energy. And Japan, of international, thing we But is AWS continue more profitability to So which we're benefits. some as Europe use of is look we'll a emerging we'll the in to our On through to offset new countries and as for scale, investments fighting always by and trajectory. less that optimize outrun of ways operations Prime growth countries in a

tied issue in costs think the more even a bit always costs Day And States. fuel a and in in margin quarter-over-quarter, losses from I the there, Prime has biggest the was operating seen because international. to lesser America increase deals. profitability And additional versus just United Europe. Prime QX of North it's certainly of Day there's higher both We've in lot some

use of lot So device. And part a We is make We of the sell money don't a of sales. make devices our Prime money big we on device events. Day again, during the on that device. the

the So can that end hurting quarter. always up profitability in

So some there contributing are things.

as America. make they of about not normal, how that efficiency, normal, level, new improvements important macro hard is quickly the North operations internationally capital As talked as can improvements that far and to are working as I we'll sure make a lot improvements. we the new are on see very we're current in profitability A

Jefferies. question. of the comes proceed Please And question with our Brent line your next Thill with from

you you're would customers and what talk seeing to on in when I'm you related from near-term a of optimizing such think can about percent, And describe Brian, characterize seeing you're to the efficiency, pullback is Everyone's question you How talk backlog. other terms why divergence? I perhaps you running curious is AWS, just asking, and that demand? your large. pretty XX-plus so the divergence those backlog conversations? has big revenue between been do how Backlog

question answer backlog Let Dave have first. me the

here. It's Yeah. Dave

our for $XXX QX balance is think I So current billion. backlog

about less year-over-year. I new the than is So XX% XX%, a And up it's think customer pipeline little healthy. about

to continuing place. a customers, I of in plans lot think with they're and enterprises put

talk will this second. QX. optimization fluctuate commitments growth, for you it because Brian on bit those think period Backlog in the of the I is end that figure, can cost quarter-to-quarter a and the some adjust about of a the little sign it $XXX.X how but, billion yes, in dependent

your cost like there have are demand other And question showing probably companies that's first, and business being very services, those first strong financial spend. their in in Yes. it. our But as of down, save optimization, being down. industries, industries like of about is that's the well, up what basically, that part customers looking some as mortgage are committed cryptocurrencies lower we things some see versus to We're volumes money

that. We do can to to performance switch chips can workloads to higher performance can that switch profiles. have have Graviton They better. They have them They manage ratios. that options for cost different products lower-cost

cost inflation in and way. do Again, let the Amazon other the a computing highly of services and can expense electricity everything we customer So, really customers using is be and to turn else. highs to business expense, get lows things normally the our a of about and because what good showing very can us fixed allow right we their long-term. of think secure now, benefit into they a cloud variable up all and And they really can manage for for

XXXX, in some the I cloud that for adoption good So, demand long-term on computing. offset that is periods are like these short companies have But time run the think drops. in just

the XXXX up that think there bit high what that and were down went I was volumes was a companies pandemic. different that were went companies during in servicing there's quite

we're place I to, the doing I and that, want and that same spend. here as and now, just is watch is they not appreciate And in right their dynamic Amazon. think thing So, at again, cautious everyone CFO,

question comes question. next line of John Blackledge Cowen. with the your our from proceed with And Please

That’s questions. great. Thanks. Two

bit those last consumer details just And holiday First, and could and hitting far, your when you on the expectations season It's then holiday provide of more we could some for cost the structure this a season. guide second, implicit in Thank the P&L? curious on year. initiatives you. versus remarks demand but your see initiatives, thus

Sure.

me with Let the start holiday.

we've we're are for ever great very good deals. to with them the roll. find And want holiday we're our some We've levels So, ready And really to value I had. a the we season consumers getting Delivery some close to high. to have ready Access be. sale, year. of think, a got to consumers. and best selection allowed It jump In-stock for great holiday where them Early are speeds really their this created Prime get also on just purchases the

So, hold we're hard that Prime to teams happy four year with that put effort. this within And very worked together events two that months. the large

But we're and is for we're weighing factors sure spend. effective us consumers we're consumers of people's we're Advertisers our on a advertising various holiday outcomes. versus not the looking holiday. are And wallets, ready quite strong looking very And know how spending year. But for are about we well. at for variety deals, last advertising. be will they're when ready point optimistic realistic that and So, where that the positions good to the there's

both and also advantages partners So we feel we sellers that advertisers. a help and consumers have like of will that our lot

We've great So in-stock very FBA sellers. is the our had seller from high. in-stocks

ready be ready when so quarter, the whether range we're go. just are. we about for that very a we outcomes fourth about realistic have we're just And of to may have we optimistic And to

to is fixed and cost fourth the take spend goal taken still quarter, we on that like is our forward steps quick structure area. On fulfillment cost the the up. CapEx lot supply we’re leverage, We for there Inflation year. past, our very and us. fulfill A just initiatives work of do looked in about sure On because use we've I've It's start we've a there, of future a trucks out. and our parts feeding a have buckets world. good, productivity, ahead is large much On other tightened of said know alter years' inflation. operations, fixed stress a the of CapEx do as but and a in plan initiatives, in productivity, We've demand And much -- feel strong good lot can, any the we preventing I good operations lot given there's job you're talking that environment. order to of make trucking fuel that and it's transportation a made We or primarily save a an year in a lot made on we hard the we arc next in fast condition leave as to wildcard. from think capability. to as we of there's of cost leverage fully -- about QX lot that strides, or in of long-zone three of utilized period every lot really of world. a the as to use shipments, to in maximum like we're the trying can money our productivity to in improve best a We use ourselves shipments inflationary are versus But of way. the things

impact through year working the the will Those it of working first in definitely there save having very not hard as half next customer. them on of end the well. We're and be umbrella challenges the year, under we'll the working of to be we're that. So

calls So progress opportunities. where we'll and as see you keep our posted we have quarterly on we these

with from with come Barclays. question line final our your And question. proceed Ross Sandler the will Please of

guys. Hey,

two clarifications on what you said. Just just

So, first, efficiency XQ, retail, and about good you did $X.X see billion. you some talked on gains in

years? a XQ we on just favorable, year, historical X that forward, America you mid-XXs said back to Is get frame look how you you margins? rate. retail time do of two kind that? the think those do half AWS, run And if mentioned back North then, quickly you could three of areas operating Any As on was turn

talking of One in was weakness incremental macro peers prominent XQ. your about

in same of just you or could expecting you are price the concessions the you of Thank in XQ made So thing XQ, getting talk in you. some are front already of that? kind about,

question Was that AWS, on Ross? second

AWS Exactly. trajectory. Yes,

Okay.

But harder not to There's to work extra of continue fight. high in when levels. that on a environment, will take to that space in Dave, lot for forecast QX me little in our Let a XXXX, the aiming short with blockages There's, making it on to about of clarify, that $X.X to answer. the lot improvements -- can't about want just just we and outlined into work productivity. $X.X versus came Primarily feel we billion is were We billion start have prior QX. it's of up message off we paid in sequentially we efficiency. that been that. I like My Access we aware I for the on. QX. in AWS? our But really inventory Day we the on while Prime But events have those do are for and today. warehouses. ready -- constraints. preparations events, as our you working and talking Prime themselves. I'm the a of we our And really and XXXX about we mostly at have a sellers, work yet, been that But question with in In-stocks lot levels the and in do Early get event, productivity with have only you running have very improvement high inventory

Dave. quarter in growth rate had as sort than come other of spoken nothing asking year-over-year the Yeah, already Ross, were this exited around just and down he's about. said progressed There's growth rate. really We've is AWS. what seen Brian you I'd to mid-XXs add the the third

again of else how into nothing thinking for End that. ranges on and so guidance add us the for joining next to Q&A look the your And in interest Relations but Thanks informed that's And three call quarter. the your our months. about for to fourth questions. quarter, Investor A we're heading replay today on will appreciate at be forward you talking Amazon. We available we website with least on

does you This teleconference. conclude Thank everyone. today's

time. lines disconnect have day. Thank And may your your You you participation. great this for at a