4 Key Takeaways From Amazon’s Earnings Call

After online retailer Amazon (AMZN) delivered a strong earnings report Thursday afternoon, CEO Andy Jassy and other executives spoke to analysts on the e-commerce company’s earnings call. The company’s shares jumped 7% in after-hours trading.

Jassy said the company’s low prices and quick delivery helped deliver strong holiday sales to cap a good year for the company. Its AWS cloud revenue grew on increasing AI interest, while its advertising revenue shot higher on new streaming TV options that opened it to smaller businesses.

Record-Breaking Holiday Shopping Drives Strong Retail Sales

Amazon sold more items during the 2023 holiday season than ever. Jassy said the holiday outcome was spurred by Black Friday and Cyber Monday shopping events that were open to all customers, helping to drive membership to its Prime service. Amazon customers saved $10 billion over last year with deals and coupons offered by the online retailer. 

“Customers responded to our continued focus on selection, price and convenience,” Jassy said. 

Delivery Speeds ‘Fastest Ever,’ Same-Day Orders Jumping

Amazon achieved its fastest ever delivery speeds, Jassy said, with 4 billion orders in the U.S. arriving the same, or next, day. Regionalization was a big factor in the improvement. Amazon put more products closer to consumers and an expansion of its same-day facilities led to a 65% year-over-year increase in rapid orders. 

“As we’re able to get customers items this fast, it increases the number of occasions that customers choose Amazon to fulfill their shopping needs and we see this in all sorts of areas,” Jassy said.

Putting items closer to their customers is also making it cheaper to serve them, Jassy said. Amazon reduced its cost-to-serve a customer by 45 cents a unit, as 2023 was the first year since 2018 when the retailer lowered its global cost-to-serve. Lowering its cost-to-serve also lets the online retailer add selection, another factor driving strong online retail sales. 

AI, Large Deals Help Drive AWS Cloud Growth

Amazon’s cloud computing unit added revenue incrementally each quarter, with fourth-quarter revenue growing 13% over last year. Amazon inked several large deals, including with Salesforce (CRM), BMW, Nvidia (NVDA), Merck (MRK), Amgen (AMGN) and others.

“Our customer pipeline remains strong, with existing customers renewing at larger periods, and migrations are growing,” Jassy said.

It was also a “significant year for delivery and customer trial” for generative artificial intelligence (AI) services like Bedrock and its Amazon Q coding companion.

“Customers don’t want only one model, they want different models for different applications,” Jassy said. 

Prime TV Spots Drive Advertising Revenue Up

Sponsored advertising of products helped drive advertising revenue higher by 27% on the year. The company for the first time is including ads for its streaming services that require no minimum, putting it in reach of smaller businesses, Jassy said. The service provides 15 new advertising capabilities and no minimum spend on Amazon Freevee, Twitch and Fire TV apps. 

“While still early days, streaming TV advertising continues to grow quickly,” Jassy said.