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string | quarter
int64 | year
int64 | date
string | company_name
string | company_id
float64 | text
string |
|---|---|---|---|---|---|---|---|
500
|
AMD
| 1
| 2,025
|
2025-05-06 17:00:00
|
Advanced Micro Devices, Inc.
| 168,864
|
inferencing throughput. We released ROCm 6.4 in the quarter with major upgrades that increased training and inferencing performance across popular AI frameworks like PyTorch, JAX, and vLLM. The release also adds multiple ease-of-use features, including new cluster management tools that simplify the scaling and optimization of large-scale Instinct deployments. Turning to our AI solutions capabilities, earlier this quarter, we completed our acquisition of ZT Systems, adding world-class systems design expertise to complement our silicon and software leadership. With ZT, we can provide ready-to-deploy RAC-level AI solutions based on industry standards built with AMD CPUs, GPUs, and networking, reducing deployment time for hyperscalers, and accelerating time-to-market for OEM and ODM partners. The team is fully engaged in already co-designing with key customers on RAC-level designs optimized for our upcoming MI400 series and working with customers and OEM partners to accelerate time-to-market for our MI350 series. We have received significant interest in ZT's manufacturing business and expect to announce a strategic partner shortly. We began sampling our next-gen MI350 series with multiple customers in the first quarter and remain on track to begin accelerated production by mid-year. MI350 series performance is very strong based on the advances in our CDNA 4 Architecture. We designed CDNA 4 to deliver leadership performance across a wide range of AI workloads, increasing memory capacity and bandwidth 1.5x, adding support for new data types, and improving network efficiency to deliver 35x higher throughput and performance compared to MI300X. Customer interest in the MI350 series is very strong, setting the stage for broad deployment in the second half of this year. As one example, we are partnering with Oracle to deploy a large-scale cluster powered by MI355X accelerators, fifth-gen EPYC Turin processors, and Polara 400 AI NIC. This multi-billion-dollar initiative highlights the expanding AMD and OCI partnership and a
|
501
|
AMD
| 1
| 2,025
|
2025-05-06 17:00:00
|
Advanced Micro Devices, Inc.
| 168,864
|
processors, and Polara 400 AI NIC. This multi-billion-dollar initiative highlights the expanding AMD and OCI partnership and a growing demand for AMD Instinct to power the next wave of large-scale AI infrastructure. Looking ahead, our MI400 series development remains on track to launch next year. The MI400 series is designed to deliver leadership performance for both inferencing and training, scaling seamlessly from single servers to full data center deployments. Early customer feedback has been very positive, marking a major step forward in our Instinct roadmap and significantly expanding our AI Accelerator TAM as customers plan broader Instinct deployments to power a larger share of their AI infrastructure. I'm looking forward to sharing more details on the MI350 series, future MI400 RAC scale solutions and the growing customer adoption of our Instinct platforms at our advancing AI event on June 12th. Turning to our client and gaming segment, segment revenue increased 28% year-over-year to $2.9 billion. Client revenue grew 68% year-over-year marking our fifth consecutive quarter of revenue share gains. We delivered record client CPU ASP driven by a richer mix of high-end desktop and mobile Ryzen processors. Desktop channel sellout increased by more than 50% year-over-year. We set new sellout records in multiple regions as our latest generation Ryzen processors became the CPU of choice for gamers, topping bestseller lists at leading global retailers. To build on this momentum, we extended our desktop CPU portfolio with the launch of our 16-core Ryzen 9 9950 X3D processor that delivers significantly higher gaming and productivity performance than the competition. In mobile, AMD-based notebook sell-through was very strong in the quarter. We also saw strong demand for our latest generation AI PC processors as sales ramped, increasing by more than 50% quarter-on-quarter. The first notebooks powered by our new high-end Ryzen AI Max Plus and the first mainstream Ryzen AI 7 and 5 300 series processors launched to very
|
502
|
AMD
| 1
| 2,025
|
2025-05-06 17:00:00
|
Advanced Micro Devices, Inc.
| 168,864
|
powered by our new high-end Ryzen AI Max Plus and the first mainstream Ryzen AI 7 and 5 300 series processors launched to very positive reviews. These new processors set the standard for traditional computing and graphics performance while also delivering unmatched AI capabilities and battery life, positioning Ryzen as a CPU of choice for gaming, ultra-thin, and commercial notebooks. Demand for AMD-based commercial PCs was also very strong in the quarter. Ryzen Pro PC sell-through grew more than 30% year-over-year, driven by new end-customer wins and an 80% increase from 2024 in the number of AMD-powered commercial systems from HP, Lenovo, Dell, and Asus. We closed multiple wins with large auto, energy, healthcare, financial services, and telecom companies in the quarter. Looking more broadly across the PC market, we remain confident we can grow client processor revenue well ahead of the market in 2025, led by expanding adoption of our desktop channel and consumer and commercial notebook portfolio, as well as a richer mix. Turning to our gaming business results, gaming revenue decreased 30% year-over-year, as higher Radeon graphics sales were more than offset by lower semi-custom sales. While our semi-custom SoC sales declined year-over-year, console channel inventories have normalized, and demand signals have strengthened for 2025. For PC gaming, we launched our Radeon 9070 series to strong demand, as our new RDNA 4 Architecture delivers leadership performance for mainstream gamers. First week sellout set a record, and was more than 10x higher than our previous best Radeon launch. Demand remains very strong, and we are working closely with our board partners to replenish inventory weekly and meet the sustained demand. We also introduced FSR 4, our first machine learning-based rendering technology that delivers significantly higher frame rates and more immersive gaming experiences. FSR 4 is already enabled in over 30 games, with support expected to reach 75 titles by yearend. Turning to our embedded segment,
|
503
|
AMD
| 1
| 2,025
|
2025-05-06 17:00:00
|
Advanced Micro Devices, Inc.
| 168,864
|
4 is already enabled in over 30 games, with support expected to reach 75 titles by yearend. Turning to our embedded segment, first quarter revenue decreased 3% year-over-year to $823 million. Embedded demand continues to recover gradually. We expect improving demand in the test and measurement, communications, and aerospace markets will drive a return to growth in the second half of 2025. We completed initial shipments of our cost-optimized Spartan UltraScale Plus FPGAs, and second-generation Versal AI Edge SoCs to meet growing demand for AI at the Edge. As a part of continuing to grow our embedded x86 business, we launched our EPYC-embedded 9005 series CPUs that deliver leadership performance for networking, storage, and industrial edge applications. Cisco selected our new EPYC-embedded processors for their latest high-end firewall solutions, and IBM is using them to power its latest storage-scale System 6000 for performance-intensive enterprise analytics and AI workloads. We also released our latest Vitis AI software suite, expanding support for the latest models, and accelerating edge AI deployment across a broader range of applications, further strengthening our leadership in the rapidly emerging edge AI market. In summary, our strong first quarter results and second quarter outlook reflect the momentum we are building across our business. While we face some headwinds from the dynamic macro and regulatory environments, including the recently announced export controls for Instinct MI308X shipments to China, we believe they are more than offset by the powerful tailwinds from our leadership product portfolio. Against this backdrop, we remain confident we can deliver strong double-digit-percentage revenue growth in 2025 based on accelerating share gains with our latest generation of Zen 5 EPYC and Ryzen CPUs and Radeon GPUs, and ramping production of our Instinct MI350 series accelerators in the second half of the year to support an expanded set of customers and AI workloads. We also expect full year growth in
|
504
|
AMD
| 1
| 2,025
|
2025-05-06 17:00:00
|
Advanced Micro Devices, Inc.
| 168,864
|
in the second half of the year to support an expanded set of customers and AI workloads. We also expect full year growth in our semi-custom business, and for our embedded business to return to year-over-year growth in the second half of the year, driven by the reduced inventory levels and improving demand environment. To capitalize on our unprecedented growth opportunities and deliver our next major growth arc, we are expanding investments in our product and technology roadmaps, go-to-market initiatives, and full-stack AI software and data center scale solutions capabilities. We're also doubling down on our execution to deliver, and where possible, accelerate our industry-leading roadmaps. We view the current environment as a strategic opportunity to further differentiate AMD as we deliver an expanding product portfolio that combine leadership compute and AI capabilities for data centers, Edge, PCs, and embedded end devices. Now I'd like to turn the call over to Jean to provide some additional color on our first quarter results. Jean?
|
505
|
AMD
| 1
| 2,025
|
2025-05-06 17:00:00
|
Advanced Micro Devices, Inc.
| 168,864
|
Jean Hu: Thank you, Lisa, and good afternoon, everyone. I'll start with a review of our financial results and then provide our current outlook for the second quarter of fiscal 2025. As a reminder, for comparative purposes, our first quarter fiscal year 2025 financial statement disclosures include the combination of our client and the gaming businesses into a single reportable segment to align with how we manage the business. We continue to provide distinct revenue disclosures for our data center, client, gaming, and embedded businesses. We are pleased with our record first quarter revenue of $7.4 billion, exceeding the high end of our guidance, up 36% year-over-year, driven by 57% revenue growth in the data center segment and a 28% revenue growth in the client and the gaming segment. Revenue declined 3% sequentially due to lower revenue in the embedded and data center segments, partially offset by sequential growth in the client and the gaming segment. Gross margin was 54%, up 140 basis points from a year ago. Operating expenses were $2.2 billion, an increase of 28% year-over-year, as we continue to invest aggressively in go-to-market activities and in R&D to address the significant growth opportunities ahead of us. Operating income was $1.8 billion, representing a 24% operating margin. Taxes, increased expenses, and other was $213 million. For the first quarter of 2025, diluted earnings per share was $0.96, an increase of 55% year-over-year. Now turning to our reportable segments, starting with the data center. Data center segment revenue was $3.7 billion, up 57% year-over-year, primarily driven by continued CPU server share gains across both the cloud and enterprise customers, and a strong growth of AMD Instinct GPUs. On a sequential basis, data center segment revenue decreased 5%. Data center segment operating income was $932 million, or 25% of revenue, compared to $541 million, or 23% a year ago. Client and gaming segment revenue was $2.9 billion, up 28% year-over-year, driven primarily by strong customer
|
506
|
AMD
| 1
| 2,025
|
2025-05-06 17:00:00
|
Advanced Micro Devices, Inc.
| 168,864
|
23% a year ago. Client and gaming segment revenue was $2.9 billion, up 28% year-over-year, driven primarily by strong customer demand for our latest generation Zen5 AMD Ryzen processors, partially offset by lower semi-customer revenue. Client revenue was $2.3 billion, up 68% year-over-year. More than half of the growth was driven by higher ASPs from a richer mix of high-end Ryzen processors. On a sequential basis, client and gaming segment revenue increased by 2%, primarily driven by stronger than seasonal performance of our client product portfolio, and increased to semi-customer product revenue. Client and gaming segment operating income was $496 million, or 17% of revenue, compared to $237 million, or 10% of year-ago, driven by operating leverage on higher revenue. Embedded segment revenue was $823 million, down 3% year-over-year. Embedded demand continues to recover gradually. Sequentially, embedded was down 11%, consistently without expectations. Embedded segment operating income was $328 million, or 40% of revenue, compared to $342 million, or 41% a year-ago. Turning to the balance sheet and the cash flow. During the quarter, we generated $939 million in cash from operations, and our free cash flow for the quarter was $727 million. We returned $749 million to shareholders through the repurchase of common stock and our repurchase program. We have $4 billion remaining in our share repurchase authorization. At the end of the quarter, cash, cash equivalents and short-term investment was $7.3 billion. Within the quarter, we raised $1.5 billion of debt and issued $950 million of commercial paper to help fund our acquisition of ZT Systems, which was completed on March 31st. Now turn to our second quarter 2025 outlook. As a reminder, in April, a new export license requirement was put in place for MI308 shipments to China, the impact of which is included in our guidance. We expect revenue to be approximately $7.4 billion, plus or minus $300 million. This includes an estimated $700 million revenue reduction as a
|
507
|
AMD
| 1
| 2,025
|
2025-05-06 17:00:00
|
Advanced Micro Devices, Inc.
| 168,864
|
to be approximately $7.4 billion, plus or minus $300 million. This includes an estimated $700 million revenue reduction as a result of the new export license requirement. Despite this headwind, the middle point of our guidance represents 27% year-over-year revenue growth. For the full year 2025, we estimated the revenue impact due to the export license requirement to be approximately $1.5 billion. Sequentially, we expect client and gaming segment revenue to increase by a double-digit percentage, embed segment revenue to be flattish, and we expect data center segment revenue to decrease due to the exclusion of MI308 revenue. In addition, we expect second quarter non-GAAP gross margin is estimated to be 43%, inclusive of approximately $800 million in charges for inventory and related reserves. Excluding this charge, our non-GAAP gross margin would be approximately 54%. Non-GAAP operating expenses to be approximately $2.3 billion, which includes approximately $50 million in OpEx due to the addition of the ZT System design key. The financials for the ZT manufacturing business will be reported as discontinued operations starting in the second quarter. We expect net interest and other expenses to be $5 million due to the debt associated with the ZT System transaction. Non-GAAP effective tax rate to be 13%, and the diluted share count is expected to be approximately 1.64 billion shares, which includes 9 million shares related to the ZT transaction. Looking forward, despite ongoing macro and trade policy related uncertainties, we believe the investment we are making will position us well to address the large growth opportunities ahead as AI expands the use of high-performance computing across all our end markets. In closing, 2025 is off to a strong start as we continue to execute on key strategic and financial goals. We delivered strong top line revenue growth, expanded gross and operating margins, and closed the key acquisition of ZT Systems to expand and accelerate our data center GPU and systems roadmaps. With that,
|
508
|
AMD
| 1
| 2,025
|
2025-05-06 17:00:00
|
Advanced Micro Devices, Inc.
| 168,864
|
and closed the key acquisition of ZT Systems to expand and accelerate our data center GPU and systems roadmaps. With that, I'll turn it back to Matt for the Q&A session.
|
509
|
AMD
| 1
| 2,025
|
2025-05-06 17:00:00
|
Advanced Micro Devices, Inc.
| 168,864
|
Matt Ramsey : Thank you very much, Jean. John, can you go ahead and pull the callers for the Q&A session, please? Thank you.
Operator: [Operator Instructions] And the first question comes from the line of Joshua Buchalter with TD Cowen.
Joshua Buchalter: Thank you. Thank you for taking my questions, and congrats on the results. I was hoping you may expand on the drivers of upside in both the print and in particular the guide. How should we think about Q2 growth by segment? And I wanted to double-click on client in particular. That business is up 67% year-over-year in the first quarter, and there's obviously a lot of concerns on pull-ins. So, I was hoping you could walk through some of the drivers of the strength in client in particular and how you're thinking about that in Q2. Thank you.
|
510
|
AMD
| 1
| 2,025
|
2025-05-06 17:00:00
|
Advanced Micro Devices, Inc.
| 168,864
|
Lisa Su: Okay, great, Josh. Thanks for the question. Look, we were very pleased with our performance in Q1. We actually saw a strength across a number of our businesses. We saw strength certainly in the client business, very strong desktop performance. We saw strength in our gaming business as well, which was really due to our strong Radeon launch. And we also saw some strength in our data center business across both stronger CPU and GPU. So, those are some of the drivers for our Q1 performance. And in particular, on your question of client performance, we've certainly looked very carefully at the ordering patterns and what customers are telling us. We have not seen a lot of tariff-related activity in that business. I would say, though, what we have seen is a real stronger mix in strength in our overall ASPs. So, the desktop channel, which is an area where we have a very strong, gaming products right now, actually performed well above seasonality in Q1. And that is really the strength of the ASPs there. So, that's what we saw in Q1. And then to your question about the guide for Q2, as Jean mentioned, we do have the new export control limitation on MI308. So, we have taken out that revenue, which is a $700 million headwind in Q2. But with that, we have a strong outlook given the strength across the rest of our businesses. So, we continue to see strength in clients going into the second quarter. Again, the desktop business continues to perform above typical seasonality. We're also seeing the beginning of the commercial ramp, which is a place where we have traditionally been quite underrepresented. We see continued strength in gaming. I would say much better than typical seasonality. That is really our AIB business with the Radeon products are ramping, as well as, consoles have now drained all of their inventory. And so they are starting their ramp into the year. And from a data center side, we see sequential growth on the CPU side. We see the GPU right on track, minus the China export controls. And so, for all of
|
511
|
AMD
| 1
| 2,025
|
2025-05-06 17:00:00
|
Advanced Micro Devices, Inc.
| 168,864
|
we see sequential growth on the CPU side. We see the GPU right on track, minus the China export controls. And so, for all of those reasons, we're pleased with where the performance of the business is right now.
|
512
|
AMD
| 1
| 2,025
|
2025-05-06 17:00:00
|
Advanced Micro Devices, Inc.
| 168,864
|
Jean Hu: Yes, I'll just add one point to what Lisa just said on the client business. We had really strong performance in Q1, especially client revenue is largely flat issue versus Q4. When you look behind it, our unit actually declined a double digit. So the revenue flat issue is largely driven by the ASP increases sequentially due to the richer mix that Lisa just mentioned.
Joshua Buchalter: Thank you for all that color. To follow up, I wanted to ask about how the ex-China, ex-308 Instinct family performed in the quarter and how you're thinking about the back half of the year. I think you mentioned in the prepared remarks, significant double digit year-over-year. Could you maybe provide some color on how Instinct did in the first quarter, how you're thinking about the first half ahead of the 350 ramp in next month? Thank you.
Lisa Su: Sure. So, on the Instinct ramp, I would say a Q1 performance of data center GPU was in line with maybe a little bit better than expected. I think the key point that we've said about the Instinct ramp is I'm very excited about the MI350 launch. We're right on track for that launching mid-year. I would say customer interest has been very high. So from a competitiveness standpoint, we feel really good about where it's positioned. Overall, I think one of the advantages that we have with the MI350 launch is that, from a systems overall environment, it's actually very similar to the MI300. So, we believe it's going to ramp fast. And we already have a couple of deals that have been announced, including a very important relationship with Oracle in terms of the MI350 series for a number of joint customers. So we're excited about the overall AI business. I think we continue to see strength there. I know there are some uncertainties as it relates to tariffs and other things, but this is one of those areas where from an infrastructure standpoint, there continues to be investment in AI infrastructure. And so with that, we would expect strong growth into the second half of the year.
|
513
|
AMD
| 1
| 2,025
|
2025-05-06 17:00:00
|
Advanced Micro Devices, Inc.
| 168,864
|
Operator: And the next question comes from the line of Timothy Arcuri with UBS.
Timothy Arcuri: Thanks a lot. Lisa, you said that data center GPU grew significant double digit, but it was like $600 million last March. So I would think that, I mean, I think a lot of us thought it was going to be like 1.7 to 1.75. So is that the wrong way to sort of interpret that? Because it seems like it went up triple digits at least. So can you help us there? And also, I'm curious, the additional $800 million that sort of has to come out from the ban, does that all come out in September or is there some remnants of that that have to come out in the fourth quarter as well?
Lisa Su: Yes, so again, what I would say is the data center GPU business did perform very well in the first quarter. I think we have to go back and look at what you had for first quarter 2024. But overall standpoint, it performed right where we would expect. Relative to your conversation as to where does it come out? I would say the vast majority comes out in the September quarter. So think about, Jean mentioned $1.5 billion, you would see the majority of it in Q2 and Q3 with very little in Q4. So we had always expected that the fourth quarter, because it would be very focused on the MI350 family would be non-China revenue and that's how it was planned.
Timothy Arcuri: Got it, and then Jean, just on the inventory, it was up a lot. Is that just due to ZT or is there something else happening there, thanks.
Jean Hu: Well, on the inventory side, we built some inventory primarily to support very strong client and the server ramp and also the second half data center GPU ramp. As you probably know, the lead time is really long to build for the Q3, Q4 ramp. We really need to start with us right now. That's why the inventory has increased.
Operator: And the next question comes from the line of Harlan Sur with JPMorgan.
|
514
|
AMD
| 1
| 2,025
|
2025-05-06 17:00:00
|
Advanced Micro Devices, Inc.
| 168,864
|
Operator: And the next question comes from the line of Harlan Sur with JPMorgan.
Harlan Sur: Hey, good afternoon. Thanks for taking my question. I know there's been a lot of focus in your upcoming MI350 series, Lisa, but MI400 next year is where you potentially close the competitive gap in a big way, right? You're bringing frontier class model training, performance GPU in a RAC scale solution. More and more, the challenges have been standing up these Rack Scale platforms, power, cooling, footprint, networking, connectivity, telemetry, et cetera, right? Lots of well-telegraphed issues with standing up these Rack Scale Architectures. So as you've shared your MI400 Rack Scale Solution Architecture with customers, what is the AMD team doing to potentially address the ease of these deployments with the MI400? And just in general, what's been the overall feedback been like on MI400?
Lisa Su: Yes, Harlan, thank you for the question. I think, look, we're excited about the MI350 series launch that's coming up, but we are extremely excited as well about the MI400 series and the roadmap there. I think we've been very active with customers on our roadmap. As this is one of those areas where you absolutely have to be planning many quarters in advance for that. One of the primary reasons we acquired ZT Systems was exactly to address this Rack Scale Architecture. And so from that standpoint, the closing of the ZT acquisition has been very timely. What we're doing right now is together with our ZT design team, as well as our customers design teams and our own systems design capability, really actively planning what those Rack Scale Systems are going to look like. I would say the MI400 series enthusiasm from customers is high. And there's a lot of activities that are going on right now to ensure that we do in fact learn from some of the, let's call it some of the challenges that have occurred with some of the recent deployments.
|
515
|
AMD
| 1
| 2,025
|
2025-05-06 17:00:00
|
Advanced Micro Devices, Inc.
| 168,864
|
Harlan Sur: Thanks for that. And then I continue to be impressed. I mean, seven consecutive quarters of strong year-over-year growth in your EPYC Enterprise and on-prem traction, right? You have high 30s, low 40s type share of the overall server market and enterprise and on-prem. Your share is probably in the sort of low 20% range, but significant share momentum. Can you just remind us like what has the AMD team done? What have you put in place sort of go-to-market wise to drive the strong tailwind here in what has been a very, very tough market segment to crack?
Lisa Su: I think there are a couple of things, Harlan. First of all, the strength of the product cannot be undersold, right? At this moment with fifth-gen EPYC, the overall cloud adoption has been fantastic. And then on the enterprise side, we've really broadened the product portfolio for Turin that includes, let's call it low core count up through the highest core count and frequency ranges. So that's very helpful. But probably the largest impact has been in go-to-market. In the go-to- market space, we have added significant headcount and capability to address end users directly. And with the use cases, I think some of the things that we talked about across industries, we're actually learning from each deployment and replicating that across many of the industrial partners. So overall, I think it's been a strong effort on enterprise and we're really still in the very early stages of that. I would say we're still quite underrepresented enterprise, but with the platform coverage and the processor coverage, I think we feel good about the opportunities.
Operator: And the next question comes from the line of Aaron Rakers with Wells Fargo.
|
516
|
AMD
| 1
| 2,025
|
2025-05-06 17:00:00
|
Advanced Micro Devices, Inc.
| 168,864
|
Operator: And the next question comes from the line of Aaron Rakers with Wells Fargo.
Aaron Rakers: Yes, thanks for taking the question. Going back to kind of the data center business and particularly the GPU business, I think last quarter you had alluded to the fact that you'd expected the data center revenue to be roughly flat in the first half of the year. I guess if we were to take out the $700 million impact from China, would the expectation still be flat for the year? Is that a fair assumption?
Jean Hu: So Aaron, so you're right. Last time we did mention the first half data center GPU, it's flat issue versus second half. The way to think about what Lisa mentioned is the $1.5 billion impact largely will be in Q2 and Q3. And so when you take out $700 million in Q2 and majority in Q3, that is what the impact in Q2 and Q3. But remember what Lisa mentioned is that we do see second half weighted. As we launch MI355, we will see significant ramp. Year-over-year, we see strong double digital growth of our data center business and the GPU business also.
Aaron Rakers: Okay. And then as a quick follow-up, kind of thinking about the gross margin, obviously this quarter's guidance reflective of the charge that you're taking. Should we assume that in the back half with mixed attributes to be considered that you would see a return to that 54 plus percent gross margin in the second half of the year? Is that a fair assessment?
|
517
|
AMD
| 1
| 2,025
|
2025-05-06 17:00:00
|
Advanced Micro Devices, Inc.
| 168,864
|
Jean Hu: Yes, Aaron, thank you for the question. Yes, there are a few puts takes on the gross margin. If you think about the Q2, excluding $800 million charge related to the MI308, our gross margin actually is around 54%. So at a company level, right, the mix is less favorable because the client and the gaming business is growing sequentially. But we do have a few drivers to drive the gross margin up. First, as I mentioned earlier, if you look at our client business, the gross margin has been improving because the richer mix of our latest generation product portfolio, that really helps. And also, secondly, within data center, when we expand the enterprise market share, we do see gross margin improvement. Of course, in addition, MI308 data center, GPU gross margin is on the low end of our data center GPU margin. So that also helps us. Overall, when we think about the second half, we actually think the gross margin will improve slightly because data center continues to be very strong growth driver, number one growth driver, second half versus the first half, which will be partially offset by continued strength on the client and the gaming side. Hope that answers your question.
Operator: And the next question comes from the line of Thomas O'Malley with Barclays.
Thomas O'Malley: Hey, Lisa and others. Thanks for taking my question. I really appreciate it. And Jean, thanks for the helpful answer there. I just wanted to understand your view on system-based architectures and whether you feel like you have what you need right now. Obviously, UALink 1.0 is coming out. You can use third party providers to kind of do the interconnect. ZT System does do a lot for you in terms of the system architecture. But from the interconnect side, do you think that you need more? Is that something that you're going to do internally? Look externally? Just want to understand where you think the portfolio is today and whether you can address system-based architectures of what you have today.
|
518
|
AMD
| 1
| 2,025
|
2025-05-06 17:00:00
|
Advanced Micro Devices, Inc.
| 168,864
|
Lisa Su: Sure, Tom. Absolutely. I think we feel like we have all the pieces required as well as deep partnerships in the ecosystem. And I consider it a system level optimization between CPU, GPU, networking capability, rack scale architecture. I think all of those pieces are things that we are investing in. And we're also partnering with others in the industry who are offering these capabilities. I think when we look at the architectures that our customers want, our customers are really asking for one, that we have a reference architecture that works, but also that we work with them as they want to interchange various pieces, particularly on the networking side. I think there are a couple of different solutions out there. And we are very much focused on ensuring that we interoperate across the spectrum.
Thomas O'Malley: Helpful. And then if we look at the full year, I mean, we'll get the units with the filing, but it looks like there's some material share gains here in the first quarter. When you look at the full year, just to level set us on share gains versus market growth, could you maybe talk about what you see the client business growing as a base level? And then just, obviously, it's difficult to kind of predict where share will go, but just any comments on what you're seeing thus far is a couple points of shares, kind of what you're seeing in the first quarter as well. We'll get a little more later, but mostly just on the market growth for 2025. Thank you.
|
519
|
AMD
| 1
| 2,025
|
2025-05-06 17:00:00
|
Advanced Micro Devices, Inc.
| 168,864
|
Lisa Su: Sure, Tom. So if you're asking about sharing the client business, I think that was the conversation. Look, we are very pleased with our client business performance over the last couple of quarters. I think we are seeing unit growth, particularly in desktop, but where we're seeing probably the most growth is overall revenue share. And so it's, we're gaining share in the right places, which is in, sort of high-end, notebook and commercial as well as in desktop overall. So from that standpoint, that's where we think we're going. As we go through the year, I know there's a good amount of conversation about what happens in the macro and what happens with tariffs and does that change things going forward. We are spending quite a bit of time ensuring that we are aligning with our customers, looking at inventory levels, looking at sort of consumption and overall sell-through. And we believe that we have a good overall inventory position and there is not, let's call it, a tremendous amount of pull-ins or other things that are coming into play. And we will continue to be very agile in how we look at that going forward.
Operator: And the next question comes from the line of Vivek Arya with Bank of America Securities.
Vivek Arya: Thank you. I had two questions as well. On the first one, just near-term, Lisa, did your GPU sales grow sequentially in Q1? How much was MI308 in that number? And if you look at 2025 overall, do you think GPUs can still grow despite the China headwind that you mentioned relative to the $5 billion plus you did last year?
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Lisa Su: Yes, sure, Vivek. So let me answer the second question first. We absolutely believe the data center GPU will grow and we think it will grow strong double digits. We had a plan that was second half weighted and it still is. Relative to the MI308 situation, it's certainly a headwind but one which we think is well contained given everything else that we have going on. And relative to the Q1 performance of data center GPU, it was down very modestly from Q4 which is what we expected. We did see good overall demand actually in the first quarter driven by MI325 so we had a significant adoption by a large foundational model company which was very positive there and as we go forward, we expect that we will continue to broaden both customers as well as workloads within our current customers for the Instinct portfolio.
Jean Hu: And Vivek, in Q1, MI325 and MI300 will achieve a majority of our revenue.
Vivek Arya: Great. And then longer term, Lisa, in the past you described I believe almost a $500 billion or so addressable market for AI accelerators. How much of that roughly is China because that now seems to be somewhat restricted for US companies and then also kind of related to that how should we think about these AI diffusion rules that I think there is an implementation date that is coming up on May 15th. I'm curious what you have heard. So just sort of the implication of China restrictions and these AI diffusion rules on thinking about the addressable opportunity for you longer term. Thank you.
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Lisa Su: So, Vivek, I think it's a good question. I think overall it is a very dynamic market so you will appreciate that. On the China export controls, I think, we always expected that there would be some amount of what's called limitation on sort of leading edge GPUs going into China. So that was factored into our TAM expectation when we talked about $500 billion. So I don't think that dramatically changes the TAM. But what I will say is on the AI diffusion side we're very actively working with the government as they're thinking through these rules and it's a very fine balance that we have to have. At the end of the day when we look at sort of the US AI companies, we have leading edge technology. We want to ensure that the rest of the world can really use us as the primary platform. So I think it will be important to work through the AI diffusion rules and all of that as we think about longer term TAM. We're certainly spending quite a bit of efforts trying to ensure that it's well understood the importance of the overall ecosystem and having the rest of the world really adopt the US ecosystem given our strength and leadership overall.
Operator: And the next question comes from C J Muse with Cantor Fitzgerald.
C J Muse: Yes, good afternoon. Thank you for taking the question. I wanted to revisit your assumptions around client. If you were to just flat line the Q1 actual, you would grow the business above 30%, you're obviously very bullish on taking share. You talked about huge tailwinds from ASPs. But curious when you put it all together, how should we think about traditional seasonality into the second half particularly with the potential of some pulling here in the first half?
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Lisa Su: Sure, CJ. It's a fair question. Look, we want to be very clear that our client business performance is primarily driven by the strength of the product portfolio and it's driven by some of the desktop channel products that traditionally are not so well tracked. If you look at sort of the IDCs of the world, we are planning for let’s call it second half sub seasonal given we're off to a strong start in the first half of the year. And that is what we are putting into our sort of internal planning number. So, you wouldn't see necessarily typical seasonality since the first half is better than seasonal. That being the case, I think we feel strongly that from a consumption base standpoint, we can see the data. So when we look at the Q1 performance, it was a very, very strong Q1 in terms of sellout and consumption for our desktop business. And as we start Q2, we are now four weeks into it, we see those patterns continuing. So, we're in an upgrade cycle right now. Gaming CPUs are usually purchased when they are gaming CPUs that come out in new cycles. And I think we're benefiting from that on both the CPU and GPU side which is great. I mean we are very happy with that. And we're ramping up production to ensure we keep the channel full.
C J Muse: Very helpful. And then I guess looking to next year, can you talk about 400 series and rack level solution, go-to-market strategy? You talked about kind of trying to obtain partners. Is there a certain number you're targeting? And then how are you thinking about kind of getting through learning curve challenges of getting the rack scale working with your OEM partners such that you can deliver that ramp in 2026? Thanks so much.
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Lisa Su: Of course, CJ. I think the right answer is we're getting a very early start. That's what we have to do so that we maximize the overall learning cycle that is required for rack scale solutions. We are working very closely with a number of our hyperscale partners today to define those solutions and make sure that we're thinking about the various areas that could require work. And we're also working with our OEM partners who also have, let’s call, learned quite a bit over the past couple of months and quarters as other rack scale solutions have been coming online. So, I think we're doing everything to move, let’s call it, move ahead of the learning cycle. And again, we have the benefit of the MI350 series being a relatively, let’s call it, not large list. So the And so the focus on the rack scale stuff is on MI400.
Operator: And the next question comes from Stacy Rasgon with Bernstein Research.
Stacy Rasgon: Hi, guys. Thanks for taking my questions. For the first one, given the China data center GPU headwinds in Q2 and Q3, do you think that GPU business actually grows year-over-year in Q2 and Q3? Understanding your comments for the full year on it. But do you think given those headwinds in Q2 and Q3 it can actually grow year-over-year?
Lisa Su: I think you're, let's see, Stacy, the best way to answer that question is in Q2 it's not going to grow year-over-year. Just given what we said about the $700 million coming out of Q2 and how we had previously talked about the evolution. But we do believe that it will grow year-over-year going forward in Q3 and Q4 certainly for us to do the full year with strong double-digit growth.
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Stacy Rasgon: Okay. So you do think it can grow year-over-year in Q3. Okay. For my second question, I wanted to ask about kind of the trends in Q1. So you said it was data center GPU was down I guess modestly in Q1 as expected. But again if I go back to your sort of double-digit year-over-year comments, I mean, it couldn't have been any more than like $1.4 billion in Q1 for this [inaudible] and it feels like it's less than that. Which mean it would have down at least 20% sequentially maybe more which also implies the server CPUs in Q1 were up sequentially which is also well above seasonal similar to clients. I guess what I'm asking is are those trends correct? Am I modeling that correct? And I guess what are the implications in that case of server CPUs actually up well above seasonal in Q1 given this environment?
Jean Hu: No, I think Stacy, this is Jean, I think when you think about the Q1 data center performance it's declined 5%. So it's a little bit better from server perspective because it is declined sequentially. Same thing like data center GPU like Lisa mentioned earlier it did decline. So I think that is the overall data center performance. I think I don't know about your model but that is how we really look at the numbers how we think about it.
Operator: And the next question comes from the line of Ross Seymore with Deutsche Bank.
Ross Seymore: Hi guys, thanks for letting me ask a couple questions. Kind of going to go to the embedded space. I know it's not the biggest one but everything else has been addressed pretty detailed. You mentioned the second half getting up to year-over-year growth. Seems like that requires significant double digit growth sequentially in both quarters just to get the full half there. What gives you confidence in that sort of ramp?
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Jean Hu: Ross, thank you for the question. On embedded side, we started to see gradual recovery. I think there are signs, especially the order pattern, the book to bill ratios, we see improving. Like aerospace and defense and also test measurement side, we see very visible improvement. Industrial side, the improvement is less so. There is inventory still among different customers. Overall, the trend, the demand pattern does improve. I think Q2, we did guide sequentially flattish and I think we start to see Q3, especially Q4, you will see year-over-year increase especially in Q4.
Ross Seymore: Great. Thanks for that. I guess this is my last question is on the OpEx side of things. You guided to the over number for the second quarter, $2.3 billion. You said there is $50 million from ZT in there. Is that the entirety of the ZT side of things? Or what should we think for kind of full year OpEx for the second half, however, you want to discuss it.
Jean Hu: Yes, Ross, thank for the question. For the ZT, design team, we view it as quarterly that incremental OpEx is about $50 million. That $2.3 billion includes everything from ZT because we closed the transaction on March 31st. I think when you look at the overall OpEx increase year-over-year, we continue to drive revenue growth to increase more than OpEx. Looking at Q2 at the middle point of our guidance revenue will be increasing 27% and we do expect the earnings per share growing much faster than the top line revenue growth. So OpEx side will be very disciplined to continue to manage it.
Matt Ramsey : Operator, I think we have time for one more caller. Thank you.
Operator: No problem. And the final question comes from the line of Joe Moore with Morgan Stanley.
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Operator: No problem. And the final question comes from the line of Joe Moore with Morgan Stanley.
Joe Moore: Great, thank you. One of the things your cloud customers have been talking about is this kind of growth in inference costs this sort of reasoning model using lot of inference compute and sometime tightness. Can you talk about that from AMD perspective? Are you seeing that in your business? Does that change the focus you’ve going forward?
Lisa Su: Sure, Joe. So I think overall what we're seeing is with these new reasoning models, the inferencing is more important. And there is also a move to more distributed inferencing. So, I think that plays into our strengths. I think, we have demonstrated that with MI300 that we are an excellent inference solution. And that holds true for 35 and 353 series as well. So, we continue to see with our memory bandwidth and memory capacity advantages that's a positive. I will say that as we're going into this, the number of workloads that we're seeing overall is expanding. So, we're seeing both training and inferencing as important workloads that we're working on. And our customers continue to demonstrate. I think the desire that we're seeing probably from a trend standpoint is that there are many models that people are using today. So, they're not necessarily using one model. They're actually using several different models. So, the optimizations around that are the things we're doing with our ROCm software suite.
Joe Moore: Great. Just an update on your thoughts on competing with custom silicon with A6 in AI space. Most of your largest customers also have a custom silicon offering. So will they invest in both AMD and A6 and just how do they decide how to apportion that investment?
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Lisa Su: Joe, I mean I view them as really two different things. I think, one of the primary aspects as we talk about the $500 billion TAM and the opportunities there. Look, we think A6 have a place. We happened to think GPUs have a larger piece of that because the models are changing so much. And from our standpoint, it's really important to have competitive TCOs and people want choice to get there especially as inference costs become so important and we're working on trying to expand the overall inferencing sort of capability out there. So, I don't think it's an either or. I think it's a let's get the best solutions out there and we will certainly believe that we're very competitive in inferencing and I think we're also becoming a much more solution for training as well.
Operator: Ladies and gentlemen, that does conclude the question-and-answer session. And that also concludes today's teleconference. We thank you for your participation. You may disconnect your lines at this time.
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Operator: Thank you for standing by. Good day, everyone, and welcome to the Amazon.com 4th Quarter 2024 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. And for opening remarks, I will be turning the call over to the Vice President of Investor Relations, Dave Fildes.
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Dave Fildes: Thank you, sir. Hello, and welcome to our Q4 2024 financial results conference call. Joining us today to answer your questions is Andy Jassy, our CEO, and Brian Olsoski, our CFO. As you listen to today's conference call, we encourage you to have our press release in front of you, which includes our financial results as well as metrics and commentary on the quarter. Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2023. Our comments and responses to your questions reflect management's views as of today, February 6, 2025 only and will include forward-looking statements, actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and our filings with the SEC including our most recent annual report on Form 10-Ks and subsequent filings. During this call, we may discuss certain non GAAP financial measures. In our press release, slides accompanying this webcast, and our filings with the SEC, each of which is posted on our IR website. You will find additional disclosures regarding these non GAAP measures. Including reconciliations of these measures with comparable GAAP measures. Our guidance incorporates the order trends that we've seen to date and what we believe today to be appropriate assumptions. Our results are inherently unpredictable and may be materially affected by many factors, including fluctuations in foreign exchange rates, changes in global economic and geopolitical conditions, and customer demand and spending, including the impact of recessionary fears, inflation, interest rates, regional labor market constraints, world events, the rate of growth of the Internet, online commerce, cloud services, and new and emerging technologies and the various factors detailed in our filings with the SEC. Our guidance assumes among other things that we don't conclude any additional business acquisitions, restructurings, or legal
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Our guidance assumes among other things that we don't conclude any additional business acquisitions, restructurings, or legal settlements. It's not possible to accurately predict demand for our goods and services, and therefore, our actual results could differ materially from our guidance. I will now turn the call over to Andy Jassy.
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Andy Jassy: Thanks, Dave. Today, we're reporting $187.8 billion in revenue, up 10% year over year. Given the way the dollar strengthened throughout the quarter, we had $700 million more foreign exchange headwind than we anticipated at guidance. Without that headwind, revenue would have been 11% year over year and exceeded the top end of our guidance. Operating income was $21.2 billion, up 61% year over year, and trailing twelve-month free cash flow adjusted for equipment finance leases was $36.2 billion, up $700 million year over year. We're pleased with the invention, customer experience improvements, and results delivered in 2024, and have a lot more planned in 2025. I'll start by talking about our stores business. We saw 10% year over year revenue growth in our North America segment, and 9% year over year in our international segment, excluding the impact from foreign exchange rates. Our continued focus on expanding selection, lowering prices, and improving convenience drove strong unit growth that even outpaced our revenue growth. We continue to add to our broad range giving customers choice across a variety of price points. We welcomed notable brands to our store throughout 2024, including Clinique, Estee Lauder, Aura Rings, and Armani Beauty. We continue to add to the hundreds of millions of products offered from our selling partners, who made up 61% of items that we sold in 2024, our highest annual mix of third-party seller units ever. We also launched Amazon Haul for US customers in Q4, which offers customers an engaging shopping experience that brings ultra-low priced products into one convenient destination. It's off to a very strong start. In the fourth quarter, consumers saved more than $15 billion with our low everyday prices and record-setting events during Prime Big Deal Days in October, Black Friday, and Cyber Monday around Thanksgiving. Additionally, Profitero's annual pricing study found that entering the holiday season, Amazon had the lowest online prices for the eighth year in a row,
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annual pricing study found that entering the holiday season, Amazon had the lowest online prices for the eighth year in a row, averaging 14% lower prices on average than other leading retailers in the US. Our speed of delivery continues to accelerate, and 2024 was another record-setting year for Prime members. We expanded the number of same-day delivery sites by more than 60% in 2024, which now serve more than 140 metro areas. Overall, we delivered over 9 billion units the same or next day around the world. Our relentless pursuit of better selection, price, and delivery speed is driving accelerated growth in Prime membership. For just $14.99 a month, Prime members get unlimited free shipping on 300 million items, off the same day or one day delivery, exclusive shopping events like Prime Day, access to a vast collection of premium programming and live sports on Prime Video, ad-free listening of 100 million songs and podcasts with Amazon Music, access to unlimited generic prescriptions for only $5 a month, unlimited grocery delivery on orders over $35 from Whole Foods Market and Amazon Fresh for $9.99 a month, a free Grubhub Plus membership with free unlimited delivery, and our latest benefit of a 10 cent per gallon fuel discount at BP, AMPM, and AMCO stations. When you think about this as a whole, and also compared to many other membership services that are comparably or more expensively priced and offer just one benefit like video, Prime is a screaming deal. And we have more coming for our Prime members in 2025. We also remain squarely focused on cost to serve in our fulfillment network, which has been a meaningful driver of our increased operating income. We talked about the regionalization of our US network. We've also recently rolled out our redesigned US inbound network. While still in its early stages, our inbound efforts have improved our placement of inventory so that even more items are close to end customers. Ahead of Black Friday in November, we'd improved the percentage of ordered units available in
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items are close to end customers. Ahead of Black Friday in November, we'd improved the percentage of ordered units available in the ideal building by over 40% year over year. We've also spent considerable time optimizing the number of items sent to customers in the same package, which reduces packaging, is more convenient for customers, and less expensive for us to fulfill. And our per-unit transportation costs continue to decline as we build out and optimize our last-mile network. Overall, we've reduced our global cost to serve on a per-unit basis for the second year in a row. While at the same time increasing speed, improving safety, and adding selection. As we look to 2025 and beyond, we see opportunities to reduce costs again as we further refine inventory placement, grow our same-day delivery network, and accelerate robotics and automation throughout the network. In advertising, we remain pleased with the strong growth on a very large base, generating $17.3 billion of revenue in the quarter, and growing 18% year over year. That's a $69 billion annual revenue run rate, more than double what it was just four years ago at $29 billion. Sponsored products, the largest portion of ad revenue, are doing well, and we see a runway for even more growth. We also have a number of newer streaming offerings that are starting to become significant new revenue sources. On the streaming video side, we wrapped up our first year of Prime Video ads, and we're quite pleased with the early progress and head into this year with momentum. We made it easier to do full funnel advertising with us. Full funnel is from the top of the funnel with broad reach advertising that drives brand awareness to mid funnel where sponsored brands let companies specify certain keywords and audiences to attract people to their detail pages or brands to our Amazon to bottom of the funnel where sponsored products help advertisers surface relevant product ads to customers at the point of purchase. We also have differentiated audience features that
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surface relevant product ads to customers at the point of purchase. We also have differentiated audience features that leverage billions of signals from Amazon Marketing Cloud secure data clean rooms, providing advertisers the ability to analyze data, produce core marketing metrics, and understand how their marketing performs across various channels. With our new multi-touch attribution model, advertisers can understand how various ad types in their campaigns contribute to sales. Moving on to AWS, in Q4, AWS grew 19% year over year and now has a $115 billion annualized revenue run rate. AWS is a reasonably large business by most folks' standards. And though we expect growth will be lumpy over the next few years as enterprises adopt and technology advancements impact timing, it's hard to overstate how optimistic we are about what lies ahead for AWS' customers and business. I spent a fair bit of time thinking several years out. And while it may be hard for some to fathom a world where virtually every app is generative AI-infused, with inference being a core building block just like compute, storage, and database, and most companies having their own agents that accomplish various tasks interact with one another, this is the world we're thinking about all the time. And we continue to believe that this world will mostly be built on top of the cloud with the largest portion of it on AWS. To best help customers realize this future, you need powerful capabilities of all three layers of the stack. At the bottom layer, for those building models, you need compelling chips. Chips are the key ingredient in the compute that drives training and inference. Most AI compute has been driven by NVIDIA chips, and we obviously have a deep partnership with NVIDIA and will for as long as we can see into the future. However, there aren't that many generative AI applications of large scale yet, and when you get there, as we have with apps like Alexa and Rufus, cost can get steep quickly. Customers want better price performance, and it's
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there, as we have with apps like Alexa and Rufus, cost can get steep quickly. Customers want better price performance, and it's why we built our own custom AI silicon. Tranium 2 just launched at our AWS reInvent conference in December, E2 instances with these chips are typically 30 to 40 percent more price per form than other current GPU-powered instances available. That's very compelling at scale. Several technically capable companies like Adobe, Databricks, Poolside, and Qualcomm have seen impressive results in early testing of Tranium 2. It's also why you're seeing Anthropic build its future frontier models on Tranium 2. We're collaborating with Anthropic to build project right near. A cluster of training and two ultra-servers containing hundreds of thousands of training m two chips. This cluster is going to be five times the number of Exo-ZLofts as the cluster that Anthropic used to train their current leading set of cloud models. We're already hard at work on Training 3, which we expect to preview late in 25, and defining Training 4 thereafter. Building outstanding performing chips that deliver leading price performance has become a core strength of AWS's, starting with our Nitro and Graviton chips in our core business, and now extending to Tranium and AI. It's something unique to AWS relative to other competing cloud providers. The other key component for model builders is services that make it easier to construct their models. I won't spend a lot of time on these comments on Amazon SageMaker AI, which has become the go-to service for AI model builders to manage their AI data, build models, experiment, and deploy these models. HyperPOD capability automatically splits training workloads across many AI accelerators, prevents interruptions by periodically saving checkpoints, and automatically repairing faulty instances from their last saved checkpoint and saving training time by up to 40 percent. It continues to be a differentiator with several new compelling capabilities at reinvent including the ability to
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40 percent. It continues to be a differentiator with several new compelling capabilities at reinvent including the ability to manage costs at a cluster level, and prioritize which workloads should receive capacity when budgets are reached. It is increasingly being adopted by model builders. At the middle layer, for those wanting to leverage frontier models to build Jet AI apps, Amazon Bedrock is our fully managed service providing high performing foundation models with the most compelling features making it easy to build a high-quality generative AI application. We are iterating quickly on Bedrock announcing Luma AI, poolside, and over a hundred other popular emerging models to Bedrock and reinvent. We've just added DeepSeq's R1 models to Bedrock and SageMaker. Additionally, we delivered several compelling new Bedrock features to re-event, including prompt caching, intelligent prompt routing, and model distillation, all of which help customers achieve lower cost and latency in their inference. Like SageMaker AI, Bedrock is growing quickly and resonating strongly with customers. Related, we also launched Amazon's own family of frontier models in Bedrock called Nova. These models compare favorably in intelligence against the leading models in the world to offer lower latency, lower price, about 75 percent lower than other models in Bedrock, and are integrated with key Bedrock features like fine-tuning, model distillation, knowledge base as a rag, and Agentec capabilities. Thousands of AWS customers are already taking advantage of Amazon Nova models' capabilities and price performance, including Palantir, SAP Densu Fortinet Trellix, and Robinhood, and we've just gotten started. At the top layer of the stack, Amazon Q is our most capable generative AI-powered assistant for software development and to leverage your own data. You may remember that on the last call, I shared the very practical use case where Q transformation helps save Amazon Teams $260 million and 4500 developer years in migrating over 30,000
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use case where Q transformation helps save Amazon Teams $260 million and 4500 developer years in migrating over 30,000 applications to new versions of the Java JDK. This is real value, and companies ask for more, which we obliged with our recent deliveries of Q transformation that enable moves from Windows dot net applications to Linux VMware to EC2, accelerates mainframe migrations. Early customer testing indicates the queue can turn was going to be a multi-year effort to do a mainframe migration into a multi-quarter effort, cutting by more than 50% the time to migrate mainframes. This is a big deal, and these transformations are good examples of practical AI. While AI continues to be a compelling new driver in the business, we haven't lost our focus on core modernization of companies' technology. We signed new AWS agreements with companies including Intuit, PayPal, Norwegian Cruise Line Holdings, Northrop Grumman, The Guardian Life Insurance Company of America, Reddit, Japan Airlines, Baker Hughes, the Hertz Corporation, Resin Chime Financial, Asana, and many others. Consistent customer feedback from our recent AWS reInvent was appreciation that we're still inventing rapidly in non-AI key infrastructure areas like storage, compute, database analytics. Our functionality leadership continues to expand and there were several key launches customers were buzz about, including Amazon Aurora D SQL, our new serverless distributed SQL database that enables applications with the highest availability strong consistency, post-test compatibility, It's four times faster reason rights compared to other pop distributed SQL databases, Amazon S3 tables, which makes S3 the first cloud object store with fully managed support for Apache Iceberg for faster analytics, Amazon S3 metadata, Which automatically generates queryable metadata simplifying data discovery, business analytics, and real time inference to help customers unlock the value of their data in S3, and the next generation of Amazon SageMaker which brings together all
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to help customers unlock the value of their data in S3, and the next generation of Amazon SageMaker which brings together all the data analytics services and AI services in interface to do analytics and AI more easily at scale. As 2024 comes to an end, I want to thank our teammates and partners for their meaningful impact throughout the year. It was a very successful year across almost any dimension you pick. We're far from done, and look forward to delivering for customers in 2025. With that, I'll turn it over to Brian for a financial update.
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Brian Olsavsky: Thanks, Andy. Starting with our top line financial results. Worldwide revenue was $187.8 billion, an 11% increase year over year excluding the impact of foreign exchange. This equates to an approximate $900 million headwind from FX in the Quarter, which is about $700 million higher than what we'd anticipated in our Q4 guidance range. Excluding that additional FX headwind, we would have exceeded the top end of our revenue guidance range. Worldwide operating income was $21.2 billion, our largest operating income quarter ever, and was $1.2 billion above the high end of our guidance range. Across all segments, we continue to innovate for customers while operating more efficiently at the same time. In the North America segment, fourth quarter revenue was $115.6 billion, an increase of 10% year over year. International segment revenue was $43.4 billion, an increase of 9% year over year excluding the impact of foreign exchange. Worldwide paid units grew 11% year over year, as our focus on low prices broad selection, and fast shipping continues to resonate with customers. Shifting to profitability, North America segment operating income was $9.3 billion, an increase of $2.8 billion year over year. Operating margin was 8%, up 190 basis points year over year. In the international segment, operating income was $1.3 billion, an improvement of $1.7 billion year over year, operating margin was 3%, up 400 basis points year over year. This marks the eighth consecutive quarter where we've seen year over year margin improvement in both the North Two thousand twenty-four also marks the second year in a row where we've lowered our global cost to serve on a per unit basis. In the fourth quarter, we saw strong productivity in our transportation network, from improved inventory placement, higher units per package, and reduced travel distances. We also saw improved productivity in our fulfillment centers. Overall, our teams executed extremely well throughout the quarter, and particularly during our peak seasons. I want
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centers. Overall, our teams executed extremely well throughout the quarter, and particularly during our peak seasons. I want to thank them for all they do to deliver for our customers. Looking ahead, we have several opportunities to keep lowering our costs through even better inventory placement, which also allows us to deliver items to customers faster. In the US, we're tuning our inbound network and continuing to expand our same day delivery network. Globally, we're adding automation and robotics throughout our network. While these efforts will take time to implement, and progress may not be linear, We have a good plan to continue to drive improvements in our cost structure. Advertising remains an important contributor to profitability in the North America and international segments. This quarter, we saw strong advertising revenue growth on an increasingly large base. We will also continue to invest in experiences that have potential to be important to customers in Amazon long term. In areas like Alexa, health care, and grocery, as well as satellites in the coming months. As a reminder, we currently expense the majority of the cost associated with the development of our satellite network. We will capitalize certain costs once the service achieves commercial viability, including sales to customers. Moving next to our AWS segment, revenue was $28.8 billion, an increase of 19% year over year. AWS now has an annualized revenue run rate of $115 billion. During the fourth quarter, we continue to see growth in both generative AI and non-generative AI offerings. As companies turn their attention to newer initiatives, bring more workloads to the cloud, restart or accelerate existing migrations from on-premise to the cloud, and tap into the power of generative AI. Customers recognize to get the full benefit of generative AI, they have to move to the cloud. AWS reported operating income of $10.6 billion, an increase of $3.5 billion year over year. This is the result of strong growth, innovation in our software and
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$10.6 billion, an increase of $3.5 billion year over year. This is the result of strong growth, innovation in our software and infrastructure to drive efficiencies, and continued focus on cost control across the business. As we've said in the past, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we're making. Additionally, we increased the estimated useful life of our servers starting in 2024, which contributed approximately 200 basis points to the AWS margin increase year over year in Q4. Now turning to our capital investments. As a reminder, we define these as a combination of cash CapEx plus equipment finance leases. Capital investments were $26.3 billion in the fourth quarter, and we think that run rate will be reasonably representative of our 2025 capital investment rate. Similar to 2024, the majority of the spend will be to support the growing need for technology infrastructure. This primarily relates to AWS, including support demand for our AI services, as well as tech infrastructure to support our North America and international segments. Additionally, we're continuing to invest in capacity for our fulfillment and transportation network to support future growth. We're also investing in same-day delivery facilities and our inbound network, as well as robotics and automation, to improve delivery speeds and to lower our cost to serve. These capital investments will support growth for many years to come. Turning to our revenue guidance for Q1, net sales are expected to be between $151 billion and $155.5 billion. I'd like to highlight two items impacting our Q1 revenue guidance. First, we estimate the year-over-year impact of changes in foreign exchange rates based on current rates, which we expect to be a headwind of approximately $2.1 billion in Q1 year over year, or 150 basis points. As a reminder, global currencies can fluctuate during the quarter, and just as we saw in Q4 with the strengthening of the dollar versus most other currencies. Second, a
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during the quarter, and just as we saw in Q4 with the strengthening of the dollar versus most other currencies. Second, a reminder that we are comping the impact of last year's leap year. The extra day contributed approximately $1.5 billion of additional net sales across our businesses in Q1 2024, or about 120 basis points to the year-over-year growth rate, which impacted all segments. Q1 operating income is expected to be between $14 billion and $18 billion. This guidance includes the estimated impact of certain updates to the useful life of our fixed assets. I'll provide a bit more detail in a moment, but on an aggregate basis, we estimate this will decrease full-year 2025 operating income by approximately $400 million for the assets on our balance sheet as of December 31, 2024. First, in Q4, we completed a useful life study for our servers and network equipment and observed an increased pace of technology development. Particularly in the area of artificial intelligence and machine learning. As a result, we're decreasing the useful life for a subset of our servers and networking equipment from six years to five years beginning in January 2025. We anticipate this will decrease full-year 2025 operating income by approximately $700 million. In addition, we also early-retired a subset of our servers and network equipment. We recorded a Q4 2024 expense of approximately $920 million from accelerated depreciation and related charges and expect this will also decrease full-year 2025 operating income by. Both of these server and network equipment use for life changes primarily impact our AWS segment. Lastly, we also completed a useful life study for certain types of heavy equipment used in our fulfillment centers. And are increasing the useful life from ten years to thirteen years beginning in January 2025, we anticipate this will increase full-year 2025 operating income by approximately $900 million. As we turn the page to 2025, we're energized by the great work our teams have delivered. We'll remain focused on
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$900 million. As we turn the page to 2025, we're energized by the great work our teams have delivered. We'll remain focused on driving even better customer experiences, and we believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.
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Operator: At this time, we will now open the call up for questions. If you would like to ask a question, we ask that when you pose your question, you pick up your handsets to provide optimum sound quality. Once again, to initiate a question, please hold while we poll for questions. Thank you. Our first question comes from the line of Mark Mahaney with Evercore ISI. Please proceed with your question.
Mark Mahaney: Thanks. Two quick questions. So, Brian, that's $100 billion CapEx we should think about in 2025. And then, Andy, were there any—so would you describe that AWS growth as being currently moderated down by supply constraints. Do you see those across the industry, or do you see those materially impacting AWS today? Thank you very much.
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Brian Olsavsky: So I'll take both of those, Andy. On the CapEx side, as Brian mentioned earlier, we spent $26.3 billion in CapEx in Q4. And I think that is reasonably representative of what you can expect in the annualized CapEx rate in 2025. The vast majority of that CapEx spend is on AI for AWS. It's, you know, the way the AWS business works, the way the cash cycle works is that the faster we grow, the more CapEx we end up spending because we have to procure data center and hardware and chips and networking gear ahead of when we're able to monetize it. We don't procure it unless we see significant signals of demand. And so when AWS is expanding its CapEx, particularly in what we think is one of these once-in-a-lifetime type of business opportunities like AI represents, I think it's actually quite a good sign medium to long-term for the AWS business. And I actually think that spending this capital to pursue this opportunity, which, you know, from our perspective, we think virtually every application that we know of today is gonna be reinvented with AI in inside of it. And with inference being a core building block just like compute and storage and database, if you believe that plus that altogether new experiences that we've only dreamed about are gonna actually be available to us with AI, AI represents for sure the biggest opportunity since cloud probably the biggest technology shift and opportunity in business since the internet. And so I think that both our business, our customers, and shareholders will be happy medium to long term that we're pursuing the capital opportunity and the business opportunity in AI. We also have CapEx that we're spending this year in our stores business, really with an aim towards trying to continue to improve the delivery speed and our cost to serve. And so you'll see us expanding the number of same-day facilities from where we are right now. You'll also see us expand the number of delivery stations that we have in rural areas so we can get items to people who live in rural areas
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see us expand the number of delivery stations that we have in rural areas so we can get items to people who live in rural areas much more quickly. And then a pretty significant investment as well on robotics and automation so we can take our cost to serve down and continue to improve our productivity. So that's the CapEx piece. I think the second question you asked, Mark, is really around AWS growth and whether this is being moderated down at all by supply chain constraints. What you know, it's it is hard to complain when you have a multibillion-dollar annualized revenue run rate business in AI, like we do. And it's growing triple-digit percentage year over year. It's hard to complain. However, it is true that we could be growing faster if not for some of the constraints on capacity. And they come in the form of, you know, I would say, chips from our third-party partners coming a little bit slower than before with a lot of midstream changes. It takes a little bit of time to get the hardware actually yielding the percentage healthy and high-quality servers we expect. It comes with our own big new launch of our own hardware and our own chips in Tranium two, which we just went to general availability at reInvent, but the majority of the volume is coming in really over the next couple of quarters, the next few months. It comes in the form of power constraints where I think, you know, the world is still constrained on power from where I think we all believe we could serve customers if we were unconstrained. There are some components in the supply chain like motherboards that are a little bit short in supply for various types of servers. So, you know, I think the team has done a really good job scrapping and providing capacity for our customers so they can grow. We're still growing a pretty reasonable clip as I mentioned earlier. But I do think we could be growing faster if we were unconstrained. I predict those constraints really start to relax in the second half of '25, and, you know, as I said, I think we could be
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I predict those constraints really start to relax in the second half of '25, and, you know, as I said, I think we could be growing faster even though we're growing at a pretty good clip.
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Operator: And our next question is from Eric Sheridan with Goldman Sachs. Please proceed.
Eric Sheridan: Thanks so much for taking the question. I'll just ask one that's building on Mark's questions there. Andy, when you think about the news that came out of China over the last couple of weeks and think longer term about bending the cost curve lower with AI. I understood the commentary around CapEx for 2025. Would you look at where you sit in the industry the move towards open-source elements of custom silicon, How do you think about bending the cost curve and either speeding up or amplifying time deployment to market or possibly, you know, higher returns on capital for AI? Thanks so much.
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Andy Jassy: Well, I'll tell you a few things because there are a few questions built into that. You know, first of all, I think like many others, we were impressed with what DeepSeq has done. You know, I think in part impressed with some of the training techniques, you know, primarily in flipping the sequencing of reinforcement training, reinforcement learning being earlier without the human in the loop. We thought that was interesting ahead of the supervised fine-tuning. We also thought some of the inference optimizations they did were also quite interesting. For those of us who are building frontier models, we're all working on the same types of things, and we're all learning from one another. I think you have seen and will continue to see a lot of leapfrogging between us. There is a lot of innovation to come. And, you know, I think if you run a business like AWS, and you have a core belief like we do that virtually all the big generative AI apps are gonna use multiple model types and different customers are gonna use different models for different types of workloads. You're gonna provide as many leading frontier models as possible for customers to choose from. That's what we've done with services like Amazon Bedrock, and it's why we moved so quickly to make sure that DeepSeq was available both in Bedrock and in SageMaker. You know, faster than you saw from others. And we already have customers starting to experiment with that. I think what's, you know, one of the interesting things over the last couple of weeks is sometimes people make the assumptions that if you're able to decrease the cost of any type of technology component, in this case, we're really talking about inference, it's somehow it's gonna lead to less total spend in technology, and we just, we have never seen that to be the case. You know, we did the same thing in the cloud where we launched AWS in 2006, where we offered S3 object storage for fifteen cents a gigabyte and compute for ten cents an hour, which, of course, is much lower now, many
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S3 object storage for fifteen cents a gigabyte and compute for ten cents an hour, which, of course, is much lower now, many years later. People thought that people would spend a lot less money in the on infrastructure technology. What happens is companies will spend a lot less per unit of infrastructure, and that is very, very useful for their businesses, but then they get excited about what else they could build that they always thought was cost prohibitive before. And they usually end up spending a lot more in total on technology once you make the per-unit cost less. And I think that is very much what's gonna happen here in AI, which is the cost of inference will substantially come down. You know, what you heard the last couple of weeks out of DeepSeq is a piece of it, but everybody is working on this. I believe the cost of inference will meaningfully come down. I think it will make it much easier for companies to be able to infuse all their applications with inference and with generative AI. And I think it's gonna if you run a business like we do, where we wanna make it as easy as possible for customers be successful building customer experiences on top of our various infrastructure services, the cost of inference coming down is gonna be very positive for customers and for our business.
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Operator: And the next question is from Doug Anmuth with JPMorgan. Please proceed.
Doug Anmuth: Thanks for any questions. I'll stick with AWS. To start. Just, Brian, maybe you can talk a little bit more about margins there just given that they've kind of moved between the mid-20s to the high thirties over the past two years. How should we think about that more normalized especially as you're investing that much more in generative AI? And then just on the store side, can you talk about the impact of less volume going through your shipping partner UPS going forward? And are you able to manage that incremental shipping that's required? Thanks.
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Andy Jassy: Yes. Sure, Doug. Thanks for your question. First on AWS, yeah, we have seen a lot of fluctuation in operating margin AWS, and we've said historically that they will be lumpy as you say over time. And, you know, the stage we're in right now, AI is still early stage. It does come originally with lower margins and a heavy investment load, as we've talked about. And in the short term, over time, that should be a headwind on margins. But over the long term, we feel the margins will be comparable to non AI business as well. So, you know, we're very pleased with the strong growth focus on driving efficiencies in all of our data centers, saving power, reusing power in new generative AI applications, and just generally reducing costs. So very pleased with the performance of the AWS team, and I look forward to a strong 2025. I'll take the UPS one, which is, really UPS has been a partner of ours for many years, and we expect that that we'll continue to be partners with UPS for many years. As you know, increasingly over the last several years, particularly accelerated by the pandemic, we have shipped a much larger percentage of our shipments through our logistics network, our own last-mile transportation network, and I think that's in part because we needed to scale up so fast in the pandemic with everything being shut down and needing to serve more of the total market segment share of retail units during that time. And needing to do it at a low-cost structure because, of course, our customers expect low prices, and that's the nature of the business. I think UPS has decided that serving Amazon is lower margin for them. So I think they've walked away from some of the volume that they otherwise could have had in the partnership. We're able to handle it with our own logistics capability, and we'll see how it continues to evolve.
Operator: And the next question comes from the line of Brian Nowak with Morgan Stanley. Please proceed.
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Operator: And the next question comes from the line of Brian Nowak with Morgan Stanley. Please proceed.
Brian Nowak: Thanks for taking my questions. Andy, maybe to drill a little bit into the robotics acceleration that you talked about. Any new data points, I think you can share on learnings from Shreveport? And how do we think about the scalability of savings or the timing that we could see a real impact on profitability from robotics? And then maybe just a bigger picture Gen AI, GPU-enabled changes, any other examples of how you see the Amazon retail shopping experience changing throughout 2025 as you're better using Gen AI or GPU-enabled?
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Andy Jassy: Yeah. Okay. Well, on the robotics piece, what I would tell you is, you know, since we've been pretty substantially integrating robotics into our fulfillment network over the last many years, we have seen cost savings, and we've seen productivity improvements and we've seen safety improvements. And so we have already gotten a significant amount of value out of our robotics innovations. What we've seen recently, and I think maybe part of what you're referencing in Shreveport, is that the next tranche of robotics initiatives have started hitting production. And we've put them all together for the first time as part of an experience in our Shreveport facility, and we are very, very encouraged by what we're seeing there both by the speed improvements that we're seeing, the productivity improvements, the cost to serve improvements. You know, it's still relatively early days, and these all being put together are only in Shreveport at this point. But we have plans now to start to expand that and roll that out to a number of other facilities in the network, some of which will be our new facilities and others of which will retrofit existing facilities to be able to use those same robotics innovations. I'll also tell you that this group of, call it, half dozen or so new initiatives is not close to the end of what we think is possible with respect to being able to use robotics to improve productivity cost to serve a safety in our fulfillment network. And we have a kind of next wave that we're starting to work on now. But I think this will be a many-year effort as we continue to tune different parts of our fulfillment network where we can use robotics. And we actually don't think there are that many things that we can't improve the experience with robotics. On your other question, which is about how we might use AI in other areas of the business than AWS, maybe more in, I think you asked about our retail business. The way I would think about it is that there's kind of two macro buckets of how we see people, both
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about our retail business. The way I would think about it is that there's kind of two macro buckets of how we see people, both ourselves inside Amazon, as well as other companies using AWS, how we see them getting value out of AI today. The first macro bucket, I would say, is really around productivity and cost savings. And, in many ways, this is the lowest hanging fruit in AI. And you see that all over the place in our retail business. For instance, if you look at customer service, and you look at the chatbot that we've built, we completely rearchitected it with generative AI. It's delivering; it already had pretty high satisfaction. It's delivering 500 basis points better satisfaction from customers with the new generative AI-infused chatbot. If you look at our millions of third-party selling partners, one of their biggest pain points is because we put a high premium on really organizing our marketplace so that it's easy to find things, there's a bunch of different fields you have to fill out when you're creating a new product detail page. But we've built a generative AI application for them. Where they can either fill in just a couple of lines of text or take a picture of an image or point to a URL, and the generative AI app will fill in most of the rest of the information they have to fill out, which speeds are getting selection on the website, easier for sellers. If you look at how we do inventory management, try and understand what inventory we need in what facility at what time, the generative AI applications we've built there have led to 10% better forecasting on our part, 20% better regional predictions. Our robotics, we were just talking about the brains in a lot of those robotics, are generative AI-infused that do things like tell the robotic claw, you know, what's in a bin, what it should pick up, how it should move it, where it should place it in the in the other bin that it's filling. So it's really in the brains of most of our robotics. So we have a number of very significant, I'll call it,
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that it's filling. So it's really in the brains of most of our robotics. So we have a number of very significant, I'll call it, productivity and cost savings efforts in our retail business. They're using generative AI, and again, it's just a fraction of what we have going. I'd say the other big macro bucket are really altogether new experiences. And, again, you see lots of those in our retail business ranging from Rufus, which is our AI-infused shopping assistant, which continues to grow very significantly. To things like Amazon Lens, where you can take a picture of a product that's in front of you, check it out in the app. You can find it in the little box at the top. You take a picture of an item in front of you, and it uses computer vision generative AI to pull up the exact item in a search result. To things like sizing where we basically have taken the catalogs of all these different clothing manufacturers and compared them against one another so we know which brands tend to run big or small relative to each other. So when you come to buy a pair of shoes, for instance, they can recommend what size you need, even what we're doing in Thursday Night Football where we're using generative AI for really inventive features like the sense of alerts where we predict which player is gonna put the quarterback or vulnerabilities where we're able to show viewers what area the field is vulnerable. So we're using it really all over our retail business and all the businesses in which we're in. We've got about a thousand different generative AI applications we've either built or in the process of building right now.
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Operator: And the next question comes from the line of John Blackledge with TD Cowen. Please proceed.
John Blackledge: Great. Thanks. Could you talk about the current speed of delivery, maybe how much more room to go there, and how is it driving the everyday essentials business? Then some of relatedly, any further color on inbound network efficiencies you would expect to see this year as you guys try to continue to lower the cost to serve. Thank you.
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Andy Jassy: Yeah. I would say on speed of delivery, that we measure this very carefully. And we measure both what the conversion rate is of somebody who views a product detail page with a faster delivery promise versus those that are slower as well as what we see downstream from customers once they've bought with a fast promise and what they end up buying throughout the year. And we have not yet seen diminishing returns of being able to continue to improve the speed of delivery. It doesn't mean that there won't be instances in which people are happy to take products later. You know, we have a program where if people want to pick a day during the week where they want to combine a bunch of their shipments and have it delivered then to be more sustainable and more environmentally friendly, they can. And we have plenty of customers who choose that, but we time in and time out see that people choose to buy from us more frequently when we're able to deliver to their homes or wherever they are much more quickly, and it leads to actually using us for more of their everyday purchases when we can do ever more quickly. And I think that if you look at what we're doing with Prime, you know, the promise there is for a number of items that we'll be able to deliver items to customers inside an hour. And I think when you're ordering everyday essentials where you need something more quickly, it's a big deal. And you see it, it's had a big impact on our everyday essentials. It's had a big impact on our pharmacy business where people are able to get items same day now in lots of cities throughout the US. And they're just using us much more frequently than they had before. The inbound network efficiencies, what I would tell you is, we made a pretty significant architectural change in our inbound network that we've been working on for the better part of the year that we rolled out just a few months ago. And it's what we find when we make big architectural changes like this is that you tend to get some low hanging fruit efficient
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And it's what we find when we make big architectural changes like this is that you tend to get some low hanging fruit efficient early, but then there's all sorts of tuning and refinement you have to do once you actually see it working live across the really vast network. And we have all sorts of ways here that where I think it's early, and I think we're gonna get additional efficiencies throughout the year. But I expect that we'll have opportunities to keep taking our costs to serve down this year, and that'll be a big part of
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Operator: And our final question comes from the line of Michael Morton with MoffettNath.
Michael Morton: Alright. Thank you so much for the question. I wanted to follow-up on Andy's remarks about how you're using AI within the Amazon eCommerce experience. But I wanted to talk about the other side of the coin, and that's really the eCommerce discovery process that leads people to Amazon. There's a lot of companies rolling out agents and assistants, and I would love to hear how Amazon is planning for potential disruption in this funnel and what the plans are. You spoke about Rufus, maybe make that more prominent. But what do you think the changes coming to the eCommerce funnel over the next several years would be great.
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Andy Jassy: Well, I would say that, you know, I think retailers ourselves and probably lots of other retailers, are all gonna have their own say on how they want to interact with agents. You know, I think that it's an emerging space, and if you think about the investments we've made in our fulfillment network, in our website, in all the selection that we've built, how we organize it. You know, most retailers are gonna have, you know, kind of terms in which they're gonna interact with agents, and we'll be no different that way. And I think that I do think that Rufus, if you look at how it impacts the customer experience, and if you actually use it month to month, it continues to get better and better. It's already, if you're buying something and you're on a product detail page, our product detail pages provide so much information that sometimes it's hard if you're trying to find something quickly to scroll through and figure and find that little piece of information. And so we have so many customers now who just use Rufus to help them find a quick fact about a product. They also use Rufus to figure out how to summarize customer reviews, so they don't have to read a hundred customer reviews to get an idea of what people think about that product. If you look at the personalization, you know, really, most prominently today, your ability to go into Rufus and ask what's happened to an order or what did I just order or can you pull up for me this item that I ordered two months ago? The personalization keeps getting much better. And so we expect throughout 2025 that the number of occasions where you're not sure which you wanna buy and you want help from Rufus are gonna continue to increase more and more helpful to customers.
Brian Olsavsky: Thank you for joining us on the call today and for your questions. A replay will be available on the Investor Relations website for at least three months. Appreciate your interest in Amazon.com, Inc. and look forward to talking with you again next quarter.
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Operator: And ladies and gentlemen, that does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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Operator: Thank you for standing by. Good day, everyone, and welcome to the Amazon.com Third Quarter 2024 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. And for opening remarks, I will be turning the call over to the Vice President of Investor Relations, Mr. Dave Fildes. Thank you, sir. Please go ahead.
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Dave Fildes: Hello, and welcome to our Q3 2024 financial results conference call. Joining us today to answer your questions is Andy Jassy, our CEO; and Brian Olsavsky, our CFO. As you listen to today's conference call, we encourage you to have our press release in front of you, which includes our financial results as well as metrics and commentary on the quarter. Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2023. Our comments and responses to your questions reflect management's views as of today, October 31, 2024 only and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings. During this call, we may discuss certain non-GAAP financial measures. In our press release, slides accompanying this webcast, and our filings with the SEC, each of which is posted on our IR website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures. Our guidance incorporates the order trends that we've seen to date and what we believe today to be appropriate assumptions. Our results are inherently unpredictable and may be materially affected by many factors, including fluctuations in foreign exchange rates, changes in global economic and geopolitical conditions and customer demand and spending, including the impact of recessionary fears, inflation, interest rates, regional labor market constraints, world events, the rate of growth of the Internet, online commerce, cloud services, and new and emerging technologies, and the various factors detailed in our filings with the SEC. Our guidance assumes, among other things, that we don't conclude any additional business acquisitions, restructurings, or legal settlements.
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assumes, among other things, that we don't conclude any additional business acquisitions, restructurings, or legal settlements. It's not possible to accurately predict demand for our goods and services, and therefore, our actual results could differ materially from our guidance. And now, I'll turn the call over to Andy.
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Andy Jassy: Thanks, Dave. Today, we're reporting $158.9 billion in revenue, up 11% year-over-year excluding the impact from foreign exchange rates. Operating income was $17.4 billion, up 56% year-over-year, and trailing 12-month free cash flow adjusted for equipment finance leases was $46.1 billion, up 128% or $25.9 billion year-over-year. As always, we're focused on making our customers' lives better and easier and thinking long term with respect to how we can keep helping customers and build a successful business to outlast all of us. In our stores business, we saw sales growth of 9% year-over-year in the North America segment and 12% year-over-year in the international segment. Our team continues to focus on the inputs that matter most to customers, really broad selection, low prices, fast and free delivery, and a range of compelling Prime member benefits, including our recent additions of unlimited grocery delivery from Whole Foods Market, Amazon Fresh, and local third-party grocery partners for $9.99 a month and fuel savings of $0.10 a gallon at bp, Amoco, and ampm stations in the US. At a time when consumers are being careful about how much they spend, we're continuing to lower prices and ship even more quickly, and we can see this resonating with customers as our unit growth continues to be strong and outpace even our revenue growth. In the last few months, we've hosted our largest and most successful Prime Day and Prime Big Deal Days ever and helped customers save over $5 billion across more than 50 million deals. And for the second year in a row, we are on track to deliver our fastest speeds ever for Prime members globally. We also continue to focus on lowering our cost to serve and are pursuing several initiatives that we believe will have meaningful long-term impact in this area. First, we continue to believe there are more gains on top of what we've captured thus far in outbound regionalization and getting more items closer to end consumers. As such, we're in the process of significantly changing the
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regionalization and getting more items closer to end consumers. As such, we're in the process of significantly changing the way we inbound items into our fulfillment network and subsequently spread them to our regional fulfillment nodes. In the last few months, we've made hundreds of changes to our US inbound network and opened more than 15 inbound buildings. While still relatively early in this re-architecture, we've already improved our ability to spread inventory across our fulfillment centers by 25% year-over-year, allowing us to have more of the requisite items in fulfillment centers closest to the customer, so we can compile shipments and ship to customers even more quickly. As we scale and optimize this new design, we expect these changes will further improve inventory placement, offer faster delivery time, save transportation costs, and enable us to increase units shipped per box. Second, we continue to roll out same-day delivery facilities, which is not only the fastest way to get products to customers but also one of our lowest cost ways to deliver. Over 40 million customers this past quarter have had their orders delivered for free with same-day delivery, an increase of more than 25% year-over-year. And third, we continue to innovate in robotics to speed delivery, lower cost to serve, and further improve safety in our fulfillment network. We recently launched our 12th-generation fulfillment center design with the first building launching in Shreveport, Louisiana. This is the first facility that incorporates our newest robotics inventions that simplify stowing, picking, packing, and shipping processes. Thus far, this new design reduces fulfillment processing time by up to 25%, increases the number of items we can offer for same-day or next-day delivery and is expected to drive a 25% improvement in our cost to serve during peak within this next generation facility. Though we believe we have more expansive automation and robotics than other retail peers, it's still early days in how much automation we
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believe we have more expansive automation and robotics than other retail peers, it's still early days in how much automation we expect in our fulfillment network. In advertising, we remain pleased with our progress, generating $14.3 billion of revenue in the quarter, 18.8% year-over-year growth. Our expansive reach, ability to service relevant offers to our customers, opportunity to engage customers from the top of the funnel to point of purchase, and leading capabilities around measuring outcomes at every touch point provide all types of brands with full funnel advertising at scale. With sponsored products, we're seeing meaningful growth on a very large base, and we see further opportunity in driving even better performance for advertisers by further improving the relevancy of the ads we show and by providing additional optimization controls. At the same time, some of our newer offerings are in their very early days. We're just entering our first broadcast season for Prime Video advertising, following a very strong showing at upfronts. And we're continuing to support brands of all sizes with our Generative AI-powered creative tools across display, video and audio, including our video generator that uses a single product image to curate custom AI-generated videos. While we're generating a lot of advertising revenue today, there remains considerable upside. AWS grew 19.1% year-over-year and now stands at a $110 billion annualized run rate. We've seen significant reacceleration of AWS growth for the last four quarters. With the broadest functionality, the strongest security and operational performance and the deepest partner community, AWS continues to be a customer's partner of choice. There are signs of this in every part of AWS's business. We see more enterprises growing their footprint in the cloud, evidenced in part by recent customer deals with the ANZ Banking Group, Booking.com, Capital One, Fast Retailing, Itaú Unibanco, National Australia Bank, Sony, T-Mobile, and Toyota. You can look at our partnership
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One, Fast Retailing, Itaú Unibanco, National Australia Bank, Sony, T-Mobile, and Toyota. You can look at our partnership with NVIDIA called Project Ceiba, where NVIDIA has chosen AWS's infrastructure for its R&D supercomputer due in part to AWS's leading operational performance and security. And you can see how AWS continues to innovate in its infrastructure capabilities. With deliveries like Aurora Limitless Database, which extends AWS's very successful relational database to support millions of database writes per second and manage petabytes of data whilst maintaining the simplicity of operating a single database or with our custom Graviton4 CPU instances, which provide up to nearly 40% better price performance versus other leading x86 processors. Companies are focused on new efforts again, spending energy on modernizing their infrastructure from on-premises to the cloud. This modernization enables companies to save money, innovate more quickly, and get more productivity from their scarce engineering resources. However, it also allows them to organize their data in the right architecture and environment to do Generative AI at scale. It's much harder to be successful and competitive in Generative AI if your data is not in the cloud. The AWS team continues to make rapid progress in delivering AI capabilities for customers in building a substantial AI business. In the last 18 months, AWS has released nearly twice as many machine learning and GenAI features as the other leading cloud providers combined. AWS's AI business is a multibillion-dollar revenue run rate business that continues to grow at a triple-digit year-over-year percentage and is growing more than 3 times faster at this stage of its evolution as AWS itself grew, and we felt like AWS grew pretty quickly. We talk about our AI offering as three macro layers of the stack, with each layer being a giant opportunity and each is progressing rapidly. At the bottom layer, which is for model builders, we were the first major cloud provider to offer NVIDIA's
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progressing rapidly. At the bottom layer, which is for model builders, we were the first major cloud provider to offer NVIDIA's H200 GPUs through our EC2 P5e instances. And thanks to our networking innovations like Elastic Fabric adapter and Nitro, we continue to offer advantaged networking performance. And while we have a deep partnership with NVIDIA, we've also heard from customers that they want better price performance on their AI workloads. As customers approach higher scale in their implementations, they realize quickly that AI can get costly. It's why we've invested in our own custom silicon in Trainium for training and Inferentia for inference. The second version of Trainium, Trainium2 is starting to ramp up in the next few weeks and will be very compelling for customers on price performance. We're seeing significant interest in these chips, and we've gone back to our manufacturing partners multiple times to produce much more than we'd originally planned. We also continue to see increasingly more model builders standardize an Amazon SageMaker, our service that makes it much easier to manage your AI data, build models, experiment, and deploy to production. This team continues to add features at a rapid clip punctuated by SageMaker's unique hyperpod capability, which automatically splits training workloads across more than 1,000 AI accelerators, prevents interruptions by periodically saving checkpoints, and automatically repairing faulty instances from their last saved checkpoint and saving training time by up to 40%. At the middle layer where teams want to leverage an existing foundation model customized with their data and then have features to deploy high-quality Generative AI applications, Amazon Bedrock has the broadest selection of leading foundation models and most compelling modules for key capabilities like model valuation, guardrails, rag and agents. Recently, we've added Anthropic's Claude 3.5 Sonnet model, Meta's Llama 3.2 models, Mistral's Large 2 models and multiple stability AI models. We
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Anthropic's Claude 3.5 Sonnet model, Meta's Llama 3.2 models, Mistral's Large 2 models and multiple stability AI models. We also continue to see teams use multiple model types from different model providers and multiple model sizes in the same application. There's mucking orchestration required to make this happen. And part of what makes Bedrock so appealing to customers and why it has so much traction is that Bedrock makes this much easier. Customers have many other requests, access to even more models, making prompt management easier, further optimizing inference costs, and our Bedrock team is hard at work making this happen. At the application or top layer, we're continuing to see strong adoption of Amazon Q, the most capable Generative AI-powered assistant for software development and to leverage your own data. Q has the highest reported code acceptance rates in the industry for multiline code suggestions. The team has added all sorts of capabilities in the last few months, but the very practical use case recently shared where Q Transform saved Amazon's teams $260 million and 4,500 developer years in migrating over 30,000 applications to new versions of the Java JDK as excited developers and prompted them to ask how else we could help them with tedious and painful transformations. Spend a few minutes reading developer forums about what they wish they could move away from, and you'll get an idea of what they want. Expect more practical AI game changers from Q. We're also using Generative AI pervasively across Amazon's other businesses with hundreds of apps in development or launched. For consumers, we've expanded Rufus, our Generative AI-powered expert shopping assistant to the UK, India, Germany, France, Italy, Spain, and Canada. And in the US, we've added more personalization, the ability to better narrow customer intent and real-time pricing and deal information. We've recently debuted AI Shopping Guides for consumers, which simplifies product research by using Generative AI to pair key factors to consider
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AI Shopping Guides for consumers, which simplifies product research by using Generative AI to pair key factors to consider in a product category with Amazon's wide selection, making it easier for customers to find the right product for their needs. For sellers, we've recently launched Project Amelia, an AI system that offers tailored business insights to boost productivity and drive seller growth. We continue to rearchitect the brain of Alexa with a new set of foundation models that we'll share with customers in the near future, and we're increasingly adding more AI into all of our devices. Take the new Kindle Scribe we just announced. The note-taking experience is much more powerful with the new built-in AI-powered notebook, which enables you to quickly summarize pages of notes into concise bullets in a script font that can easily be shared. Speaking of Kindle products, we just launched a completely new Kindle lineup, the first time we've done a portfolio refresh of this size. Apart from the Scribe, it includes the first-ever color Kindle, the fastest Kindle Paperwhite ever and a new pocket-sized Kindle. The early sales for these devices have significantly outperformed our expectations, and Kindle is having an excellent year with customers reading more than ever. We now have over 20 billion average monthly pages read on Kindle devices worldwide. There are so many things we're energized by right now, but we'll quickly mention one more, the progress we're making in improving customers' pharmacy experience. Brick-and-mortar pharmacies account for just over 90% of prescriptions dispensed in the US that require customers to make trips to forlorn physical venues with much of the selection behind locked shelves, waiting lines for meds and only finding out about pricing at the point of purchase. The largest mail order pharmacies offer delivery in 5 to 10 business days. We think customers deserve better. Today, we can deliver to 95% of first-time Amazon Pharmacy customers in the US within two business days and to 20% of
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better. Today, we can deliver to 95% of first-time Amazon Pharmacy customers in the US within two business days and to 20% of US Prime members within 24 hours. Next year, we plan to launch operations in 20 new cities, so nearly half the US will have the ability to have their medications delivered to their door within hours. We believe making it easier for customers to get their medications will improve medication adherence, which we know can directly improve health outcomes. Across Amazon, we have a lot coming in the next few months. We eagerly look forward to sharing these with customers, and a big thank you to my Amazon teammates around the world for all their hard work. And with that, I'll turn it over to Brian for a financial update.
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Brian Olsavsky: Thanks, Andy. Let's start with our top line financial results. Worldwide revenue was $158.9 billion, an 11% increase year-over-year, excluding a 20 basis point unfavorable impact of foreign exchange. As a reminder, our Q3 guidance had anticipated a larger unfavorable impact of approximately 90 basis points. Worldwide operating income increased 56% year-over-year to $17.4 billion, our highest quarterly operating income ever and was $2.4 billion above the high end of our guidance range. We remain focused on streamlining and managing costs in a way that allows us to continue inventing for customers in a cost-effective way. In the third quarter, North America segment revenue was $95.5 billion, an increase of 9% year-over-year. International segment revenue was $35.9 billion, an increase of 12% year-over-year. Worldwide paid units accelerated to 12% growth year-over-year as our customers continue to come to Amazon for low prices, broad selection and convenient fast delivery. Prime remains a core contributor to this growth. Year-over-year paid membership growth accelerated in Q3 from both the US and globally, helped by our tenth annual Prime Day event in mid-July. Customers are enjoying even faster delivery speeds, which also helps drive strong growth in items like everyday essentials. This includes items like health, beauty, and personal care as well as nonperishable grocery. Though all these items often have a lower average selling price, the strength in everyday essential's revenue is a positive indicator that customers are turning to us for more of their daily needs. We see that when customers purchase these types of items from us, they build bigger baskets, shop more frequently and spend more on Amazon. We remain focused on keeping prices sharp and offering broad selection that gives customers options when making purchase decisions. Shifting to profitability. Our North America and international segments each delivered their seventh consecutive quarter of year-over-year operating margin
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North America and international segments each delivered their seventh consecutive quarter of year-over-year operating margin improvement. North America segment operating income was $5.7 billion, an increase of $1.4 billion year-over-year. North America operating margin was 5.9%, up 100 basis points year-over-year. In the third quarter, we continue to make progress in improving our fulfillment network cost structure, driven in part by improved inventory placement. This helped us drive better productivity in our transportation network and shipping efficiency from higher units per box. In the international segment, operating income was $1.3 billion, an improvement of $1.4 billion year-over-year. International operating margin was 3.6%, up 390 basis points year-over-year. So far this year, we've generated operating profit in each of the three quarters for the international segment and totals $2.5 billion year-to-date. We're seeing strength in our established countries like the UK and Germany as we continue to drive efficiencies to improve on-road productivity in our transportation network and better execution in our fulfillment centers. Our emerging countries are growing revenue at a healthy rate also, and they are leveraging their cost structures on investing strategically in Prime benefits. We have confidence that our focus on the inputs, coupled with the strength of our global teams, will continue to drive improvement over time. Advertising remains an important contributor to profitability in the North America and international segments. This quarter, we saw strong growth on an increasing large base of advertising revenue. We see many opportunities to further expand our ads offering in areas that are driving growth today like Sponsored Products as well as more recent growth areas like Prime Video ads. Moving next to our AWS segment. Revenue was $27.5 billion, an increase of 19.1% year-over-year, excluding the impact of foreign exchange. AWS now has an annualized revenue run rate of $110 billion. The business
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excluding the impact of foreign exchange. AWS now has an annualized revenue run rate of $110 billion. The business continues to grow, mostly opportunity to expand our core cloud offering and our AI services. Customers increasingly recognize that to get the true benefit of Generative AI, they also need to move to the cloud. AWS operating income was $10.4 billion, an increase of $3.5 billion year-over-year as a result of our continued focus on cost control, including a measured pace of hiring, a focus on driving efficiencies in our infrastructure, and reducing costs across the business. Additionally, we increased the estimated useful life of our servers starting in 2024, which contributed approximately 200 basis points to the AWS margin increase year-over-year in Q3. As we said in the past, we expect the AWS operating margins to fluctuate, driven in part by the level of investments we're making at any point in time. Now turning to our capital investments. As a reminder, we define these as a combination of cash CapEx plus equipment finance leases. Year-to-date capital investments were $51.9 billion. We expect to spend approximately $75 billion in CapEx in 2024. The majority of the spend is to support the growing need for technology infrastructure. This primarily relates to AWS as we invest to support demand for our AI services while also including technology infrastructure to support our North America and international segments. Additionally, we're continuing to invest in our fulfillment and transportation network to support the growth of the business, improve delivery speeds and lower our cost to serve. This includes investments in same-day delivery facilities, in our inbound network and as well in robotics and automation. We're encouraged by the start of the holiday season, which kicked off in October with a strong Prime Big Deal Days. We are ready to serve customers throughout the season, and I want to thank our teams across Amazon for delivering two very large Prime member events in the past four months and for
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and I want to thank our teams across Amazon for delivering two very large Prime member events in the past four months and for getting us ready to delight customers during this holiday season. With that, let's move on to your questions.
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Operator: [Operator Instructions] And the first question comes from the line of Doug Anmuth with JPMorgan. Please proceed with your question.
Doug Anmuth: Thanks so much for taking the questions. Brian, I was hoping you could talk a little bit more about the drivers of the 38% AWS margins. I know you mentioned the 200 basis points related to the useful lives push-out, but just how to think about sustainability kind of in the 30s there going forward? And then perhaps related the step-up in CapEx that you saw in 3Q, you gave the full-year number, which was helpful. Any kind of early read or thoughts on how we should think about 2025? Thanks so much.
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Brian Olsavsky: Okay. Thanks, Doug. Let me start with AWS. Yeah, the primary drivers of the year-over-year margin increase are threefold. So first is accelerating top-line demand. That helps with all of our efficiencies, our cost-control efforts and of course, what you just mentioned, I believe, the change in the useful life of our servers this year. Let me remind you on that one. We made the change in 2024 to extend the useful life of our servers. This added about 200 basis-points of margin year-over-year. On cost-control, it's been a number of areas. It's -- first is hiring and staffing. We're being very measured in our hiring and you can tell as a company where our office staff is down slightly year-over-year and it's flat to the end of last year. So we're really working hard to maintain our efficiencies not only in the sales force and other areas and production teams, but also in our infrastructure areas. Infrastructure is a big part of our cost structure in AWS and we're probably the best at matching up supply and demand and driving cost efficiencies and driving those operations very, very strongly. And I think you saw that this quarter, especially on the higher-volume. And over-time, this margin will fluctuate in the segment. It's a number of factors to keep in mind, including our level of investment in the amount of innovation and product development we're doing for new products and services, changes in our staffing for sales and support organizations and of course, capital to support customer growth and to build cost performance chips for our customers' applications. So as I mentioned, we do a really good job of matching supply and demand and we do that in this business, it can result in quarters that we just saw.
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Andy Jassy: Yeah, I'll take the capex part of that. As Brian said in his opening comments, we expect to spend about $75 billion in 2024. I suspect we'll spend more than that in 2025. And the majority of it is for AWS and specifically, the increased bumps here are really driven by Generative AI. As I was mentioning in my own opening comments, our AI business is a multi-billion dollar business that's growing triple-digit percentages year-over-year and is growing three times faster at its stage of evolution than AWS did itself. We thought AWS grew pretty fast. And so the thing to remember about the AWS business is the cash life cycle is such that the faster we grow demand, the faster we have to invest capital in data centers and networking gear and hardware. And of course, in the hardware of AI, the accelerators or the chips are more expensive than the CPU hardware. And so we invest in all of that upfront in advance of when we can monetize it with customers using the resources. But of course, a lot of these assets are many year useful life assets. Data centers, for instance, are useful assets for 20 to 30 years. And so I think we've proven over time that we can drive enough operating income and free-cash flow to make this a very successful return on invested capital business and we expect the same thing will happen here with Generative AI. It is a really unusually large maybe once in a lifetime type of opportunity. And I think our customers, the business and our shareholders will feel good about this long-term that we're aggressively pursuing it.
Operator: And our next question comes from the line of Ross Sandler with Barclays. Please proceed with your question.
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Operator: And our next question comes from the line of Ross Sandler with Barclays. Please proceed with your question.
Ross Sandler: Andy, if I could push on that last answer, you talked about how AI is about the same size but growing way faster than early AWS. And if we look back at the market in like the early 2010s is hypercompetitive on pricing, your margins were below 15%, I believe, back then. And it seems like a lot of that is what's going on right now in AI with these new AI data centers where you've got competitive pricing and suboptimal utilization just in the whole industry. So as that revenue line grows from where it is today to tens of billions of dollars in coming years, how does that margin come on from the AI data centers versus your existing kind of 30-plus-percent margin at AWS? Any thoughts on how quickly you can close the gap and how that looks on the new AI workloads versus maybe this mid-30s that the core business is running at? Thank you very much.
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Andy Jassy: Yeah. So some quick context, Ross. I think one of the least understood parts about AWS, over time, is that it is a massive logistics challenge. If you think about, we have 35 or so regions around the world, which is an area of the world where we have multiple data centers, and then probably about 130 availability zone through data centers, and then we have thousands of SKUs we have to land in all those facilities. And if you land too little of them, you end up with shortages, which end up in outages for customers. So most don't end up with too little, they end up with too much. And if you end up with too much, the economics are woefully inefficient. And I think you can see from our economics that we've done a pretty good job over time at managing those types of logistics and capacity. And it's meant that we've had to develop very sophisticated models in anticipating how much capacity we need, where, in which SKUs and units. And so I think that the AI space is, for sure, earlier stage, more fluid and dynamic than our non-AI part of AWS. But it's also true that people aren't showing up for 30,000 chips in a day. They're planning in advance. So we have very significant demand signals giving us an idea about how much we need. And I think that one of the differences if you were able to get inside of the economics of the different types of providers here is how well they manage that utilization and that capacity. It has a very direct impact on what kind of margins you have over time and what kind of capital efficiency you also have over time. And so I think you're right, Ross, that there are some similarities in the early days here of AI, where the offerings are new and people are very excited about it. It's moving very quickly and the margins are lower than what they -- I think they will be over time. The same was true with AWS. If you looked at our margins around the time you were citing, in 2010, they were pretty different than they are now. I think as the market matures over time, there are going to be
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citing, in 2010, they were pretty different than they are now. I think as the market matures over time, there are going to be very healthy margins here in the Generative AI space.
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Operator: And the next question comes from the line of Brian Nowak with Morgan Stanley. Please proceed with your question.
Brian Nowak: Thanks for taking my questions. Andy, I have two. The first one, I feel like we talk a lot about your targets and sort of north stars for domestic profitability. Can you talk to us a little bit about how you think about the drivers of international retail profitability from here and sort of how you -- just conceptually where the margins could go and what drives them there? And then the second one, I wanted to sort of ask you more about the robotics that you mentioned. I know you've been investing in robotics now for quite a few years. Where are you now in that journey? And how do we think about the next largest areas of investment in robotics in the warehouse network? Thanks.
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Brian Olsavsky: This is Brian. Let me take the first part of that question on international segment profitability. So if you've looked at the trends, we see quarter-to-quarter fluctuations certainly in operating profit in the international segment. But we're starting to see clear trend lines that are moving positive and above zero. And for each of the last seven quarters, as I mentioned, we've had year-over-year improvement in op margin. And in the last quarter, operating income was up $1.4 billion versus the prior year. So really, it is a lot of the same factors you're seeing in North America, lower cost to serve, greater contribution from advertising, improved selection, faster delivery speeds, which help drive consumer demand. And if you step back further, international is really a mix of our established countries where we've been operating for a long time, the UK, Europe, and Germany -- excuse me, Europe and Japan, and a number of emerging countries, including 10 new countries that we launched in the last seven years. So there's a lot under the hood there and there's different stories in each country. Each of them is on a different point in the path from launching to customer adoption, just scaling towards profitability to then making consistent operating profit. So I think our expectations in each of those countries mirror those in North America. And we intend, over the fullness of time, that we're going to aim for North America margins, which are not static themselves. So we're happy with the performance. Glad to see a number above zero in many of the last few quarters, but really it’s a story on a country-by-country basis that we're working hard. On the robotics piece, what I would say is even though we believe we have more expansive and advanced automation, robotics capabilities in our fulfillment network than other peers, it's so early with respect to what we're going to do automation, robotics-wise in our fulfillment network. We're just at the stage right now where we're starting to roll out. We had
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robotics-wise in our fulfillment network. We're just at the stage right now where we're starting to roll out. We had about a five or six very significant new robotics capabilities in the areas of stowing, picking, packing, and shipping that we are finally put into one facility to get the entire workflow. It's a facility in Shreveport, Louisiana that was just launched a few weeks ago. And as I mentioned in my opening comments, we're seeing very encouraging results there. And of course, the reason why we're trying to have more robotics and automation in our fulfillment network is it allows us to fast -- to ship more quickly, to ship more cost effectively, and to make conditions even safer for our fulfillment teammates than what they already have today. And I think something that the team has done in a very disciplined way, and I talked about this a little bit in my annual letter, my shareholder letter is just they have been very thoughtful about defining what are the primitive foundational building blocks that you need, that you can then use in lots of different combinations to build additional automation/robotics capabilities down the road, so we can move even more quickly with the next generation of robotics capabilities. And that team has invested in those and they're already working on the next generation. And the last piece I would add to that is we really do believe that AI is going to be a big piece of what we do in our robotics network. We had a number of efforts going on there. We just hired a number of people from an incredibly strong robotics AI organization. And I think that will be a very central part of what we do moving forward, too.
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Operator: And the next question comes from the line of Eric Sheridan with Goldman Sachs. Please proceed with your question.
Eric Sheridan: Thanks for taking the question. Maybe a two-parter, if I can. Looking at the results in the commerce business, there's a clear sort of pattern emerging with respect to ASPs versus unit growth. Can you talk a little bit about what you're seeing in terms of consumer behavior and the propensity to be receptive to either lower ASP items or discounts among consumer behavior? And then the second part would be, can you talk a little bit about some of the strategic initiatives you're building for the long term around capitalizing on lower ASP items and the potential shift to more consumables and the base of consumption habits on the platform? Thanks so much.
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Andy Jassy: Yeah, hi, Eric, thank you for your question. Yeah, you're right. Q3 unit volume was strong, 12% worldwide. It's pretty similar in North America versus international. And the consumer factors, we've seen a continuation of many of the things we've discussed over the first -- or last few quarters. Customers looking for deals and are price conscious. This matches up well with our Prime events where we were -- which were well received and saved billions for our -- billions of dollars for our Prime members. It also led to Prime member -- paid Prime member growth accelerating in the quarter, which is hugely impactful for us. A lot of our best offers and deliveries are tuned to Prime membership, and it's the best deal in retail. So with all the benefits you get for the subscription price, so those are all positive signs. When you look at the split between revenue growth and unit growth, you do see some impact of the lower ASP products that we're selling as well as some of the trade down that consumers are doing. But we take that as a real positive, seeing the growth in everyday essential categories, which are really predicated on speed. So it's -- you have to have fast delivery to be able to sell the those products to customers. And when you do, it results in a stickier consumer relationship, higher orders, building larger baskets, which help our ship economics, and repeat orders are stronger. So those are all positive signs, and we'll take any short-term degradation in ASP because what we're focused on primarily is free cash flow here. And we see the ability to unlock all new elements of the consumer spend.
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Brian Olsavsky: I'll just add, Eric, on the lower ASP strategy. There's an expression that we've used a lot of times over the years that it's easy to lower prices but it's much harder to be able to afford to lower prices. And the same thing is probably true about lower ASP items. It's pretty easy to choose to supply them but it's much harder to be able to afford to economically supply them. And so one of the reasons that we have been so maniacal about cost to serve over the last few years is that as we're able to take our cost to serve down, it just opens up the aperture for more items, particularly lower ASP items that we're able to supply in an economic way. And when you layer on top of that the broader selection, you layer on top of that faster speed and what we're able to do in getting items and fulfillment nodes local and close to our end customers, what we're able to do in expanding our same-day network, which allows us to ship same-day but also is one of our lowest-cost ways is it just lets us serve so many more of customers' shopping missions. And that's what we're seeing in our business right now. But again, I think there's a lot of opportunity to continue to expand that.
Operator: And the next question comes from the line of Colin Sebastian with Baird. Please proceed with your question.
Colin Sebastian: Great. Thanks guys. Good afternoon. A question on online stores. The third-party unit mix declined a little bit in Q3, which is unusual. So just wondering if there are any specific drivers of that shift. And then secondly, you made a lot of progress with the AI agents on AWS and for sellers and Rufus for buyers. I wonder with all the underlying data that you have and leveraging those agent capabilities if you could provide any perspective on what a next-generation Alexa might look like and your opportunities there to perhaps drive incremental revenues. Thank you.
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Andy Jassy: Sure, Colin. Thanks for your question. On the first one, third-party sellers, yes, the percent of paid units was 60% in Q3. And if you look over the last two years, it's -- essentially, it was at 59%, stepping up to 60%, stepping up to 61% pretty much every second quarter. So what we're seeing is still in a tight band between 59% and 61%. But what we're seeing is the impact of the everyday essentials. There's -- 3P demand is still strong and unit volumes are strong. It's just the everyday essentials tend to skew more to 1P than 3P. And on your second question, Colin, around Alexa, I think we have a really broad number of Alexa devices all over people's homes and offices and automobiles and hospitality suites. We've about 0.5 billion devices out there with a couple of hundred million active endpoints. And when we first were pursuing Alexa, we had this vision of it being the world's best personal assistant and people thought that was kind of a crazy idea. And I think if you look at what's happened in Generative AI over the last couple of years, I think you're kind of missing the boat if you don't believe that's going to happen. It absolutely is going to happen. So we have a really broad footprint where we believe if we rearchitect the brains of Alexa with next-generation foundational models, which we're in the process of doing, we have an opportunity to be the leader in that space. And I think if you look at a lot of the applications today that use Generative AI, there's a large number of them that are having success in cost avoidance and productivity. And then you're increasingly seeing more applications have success in really impacting the customer experience and being really good at taking large corpuses of data and being able to summarize and aggregate and answer questions, but not that many yet that are really good on top of that in taking actions for customers. And I think that the next generation of these assistants and the Generative AI applications will be better at not just answering
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I think that the next generation of these assistants and the Generative AI applications will be better at not just answering questions and summarizing the indexing and aggregating data, but also taking actions. And you can imagine us being pretty good at that with Alexa.
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Operator: And our final question comes from the line of Justin Post with Bank of America. Please proceed with your question.
Justin Post: Great. Thank you. Maybe a couple of questions. Just on the cloud, are you at all capacity constrained, and will the new Trainium or NVIDIA chips maybe even drive sales growth faster? And then secondly and I know there's been some competition from some of the more traditional retailers growing quickly online. Maybe talk about maybe the advantages that Amazon has with a fulfillment center distribution versus store distribution? Any thoughts on that? Thank you.
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Andy Jassy: Well, on cloud, Justin, what I would tell you is that we -- I believe we have more demand that we could fulfill if we had even more capacity today. I think pretty much everyone today has less capacity than they have demand for, and it's really primarily chips that are the area where companies could use more supply. And so we have -- we're growing at a very rapid rate and have grown a pretty big business here in the AI space and it's early days, but I actually believe that the rate of growth there has a chance to improve over time as we have bigger and bigger capacity. And I think that one of the reasons I mentioned in my opening comments that we have a very deep partnership with NVIDIA. We tend to be their lead partner on most of their new chips. We were the first to offer H200s in EC2 instances. And I expect us to have a partnership for a very long time that matters. It's also true that for customers that start to scale out their implementations on the inference side, particularly, they realize pretty quickly that it can get costly. And it's really why we have pursued building Trainium and Inferentia, which is our custom silicon. And the second version of Trainium, Trainium2 will start to ramp up in the next few weeks. And I think it's going to be very compelling for customers on a price performance basis. And we have a lot of customer interest. We have gone back to our manufacturing partners a couple of times now to produce a lot more Trainium than we anticipated. Some of that, for sure, is due to the fact that we just -- we have very large demand, and we want more capacity and supply to be able to provide them. But a lot of it is that customers are excited about the price performance that they believe they're going to get in Trainium. So I think it's a very significant opportunity for us in the AWS space, and it's going to be a very significant opportunity for customers. I think on the retail side, I'd start by just saying that we've always believed that competition is very positive and very
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I think on the retail side, I'd start by just saying that we've always believed that competition is very positive and very healthy. It's good for consumers, good for businesses. It's actually great for innovation. And if you look at the retail space, it's a very, very large market segment. I mean, we have a pretty big retail business, and yet we're only about 1% of the market segment share of the worldwide global retail market segment. And still about 80% to 85% of that market segment share lives in physical stores. And so if you believe that equation is going to flip in the next 10 to 20 years, which we do, there's just a lot of opportunity not just for us but for several players. There won't be only one successful player. I do think that we have some elements of our customer experience that are really unusual and unlike others. I think we have meaningfully broader selection than almost all the players that you probably have seen and heard of. We have low prices with very significant deals that we go work with our third-party selling partners around key holiday shopping occasions. And then we have very significant advantages and speed of delivery to customers. And we just continue to see in every bit of testing and analysis that we do, that the faster that we're able to promise customers that we can get them their items, the more frequently they buy and the more they actually use Amazon for their shopping needs. And so those are things that are pretty different. I also think we have a way of prioritizing customers that I think is unusual. Our orientation, our DNA and our core at Amazon starts with the customer, and everything moves backwards from that. Any meeting you go to inside of Amazon, we're always asking ourselves what do customers want? What do customers say? What do they not like about the experience? What could be better? And that customer orientation is very important, not just in how you take care of customers, but the world changes quickly all the time. And the technology is changing really
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not just in how you take care of customers, but the world changes quickly all the time. And the technology is changing really quickly. And so if you have the combination of strong technical aptitude, propensity and a passion for inventing and then also a customer orientation where it drives everything you do, I think you have an opportunity to continue to build great trust in a business over a long period of time.
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Dave Fildes: Thanks for joining us on the call today and for your questions. A replay will be available on our Investor Relations website for at least three months. We appreciate your interest in Amazon and look forward to talking with you again next quarter.
Operator: And ladies and gentlemen, that does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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Operator: Thank you for standing by. Good day, everyone, and welcome to the Amazon.com Second Quarter 2024 Financial Results Conference. 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. And for opening remarks, I will be turning the call over to the Vice President of Investor Relations, Dave Fildes. Thank you, sir. Please go ahead.
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Dave Fildes: Hello, and welcome to our Q2 2024 financial results conference call. Joining us today to answer your questions is Andy Jassy, our CEO, and Brian Olsavsky, our CFO. As you listen to today's conference call, we encourage you to have our press release in front of you, which includes our financial results, as well as metrics and commentary on the quarter. Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2023. Our comments and responses to your questions reflect management's views as of today, August 1s, 2024 only, and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings. During this call, we may discuss certain non-GAAP financial measures. In our press release, slides accompanying this webcast, and our filings with the SEC, each of which is posted on our IR website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures. Our guidance incorporates the order trends that we've seen to date and what we believe today to be appropriate assumptions. Our results are inherently unpredictable and may be materially affected by many factors, including fluctuations in foreign exchange rates, changes in global economic and geopolitical conditions and customer demand and spending, including the impact of recessionary fears, inflation, interest rates, regional labor market constraints, world events, the rate of growth of the internet, online commerce, cloud services, and new and emerging technologies, and the various factors detailed in our filings with the SEC. Our guidance assumes, among other things, that we don't conclude any additional business acquisitions, restructurings, or legal settlements.
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assumes, among other things, that we don't conclude any additional business acquisitions, restructurings, or legal settlements. It's not possible to accurately predict demand for our goods and services, and therefore, our actual results could differ materially from our guidance. And now, I'll turn the call over to Andy.
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