Amazon Q2 Earnings, Jassy Calls AI "Biggest Tech Shift in our Lifetime" Can't Seem to Shake AWS Questions
Amazon reported earnings and continued setting a pretty high bar. All the while deploying its one-millionth robot. There was a lot to like here. Not everything, but close.
What were the key highlights of Amazon's Q2 earnings report?
Revenue up 12% y/y ex-currency
Operating Income up 31% y/y (!!) - holy cow
Even with all its success, Amazon still mostly talks about three key areas: wider selection (Nike, Aveda, Away, and Saks all added), faster shipping (records), and sharp pricing.
Everyday essentials outpaced the rest of the business. Interesting, UPS reported somewhat opposite - essentials were outpaced by splurges. I would think Amazon itself is the difference there, with Amazon volume drawing down from UPS.
Biggest Prime Day ever: signups, sales, items sold
Haven't seen diminishing demand from tariffs so far
Increased share of orders moving from direct lanes by over 40% y/y
30% more same-day items than last year in the US
Amazon Ads up 22% y/y, with a 300M audience across its properties
AWS is now a $123B run-rate business. AWS alone is 20% of Walmart's total revenue.
Q2 3P Seller Mix at 62% y/y, Highest ever, up 100bps y/y.
What were the main challenges and negative points from the earnings report?
Most noise about tariffs wrong - impossible to know what will happen (WTF economy)
No one knows what will happen when forward-bought inventory is depleted (is that really true?)
AWS grew 17.5% y/y (analysts not happy)
AWS segment margins declined from 39.5% to 32.9% in Q2
What were the "Ugly" issues noted in the report?
Grocery is still a sideshow. Perishables a new pilot to same-day customers.
"Millions" have access to Alexa+, but... why not everyone? What is the hold-up? Analysts either seem convinced that Amazon is not quite investing the right way ahead of demand (they have said the last year they are supply-constrained), or that their execution is falling short. Amazon answers that it's growing from a larger base than its nearest competitor is true, but feels ultimately unsatisfying. Still, investing way too far ahead of demand would likely be punished by investors (and creating excess capacity), so what's a company to do?
How does Amazon view the impact of AI?
"AI is the biggest tech shift in our lifetime"
"Will change every customer experience we know, and how we work." Biggest tech shift in our lifetime is pretty powerful, right?
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