Q4 2020 Amazon.com Inc Earnings Call
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Thank you for standing by and good day, everyone and welcome to the Amazon Dot Com Q for 2020 financial results teleconference. At this time all participants are in a listen only mode. After the presentation, we will conduct a question and answer session.
Today's call is being recorded for opening remarks, I'll be turning the call over to director of Investor Relations. Dave Fildes. Please go ahead.
Yeah.
Hello, and welcome to our Q4, 'twenty and 'twenty financial results Conference call.
Joining us today to answer your questions is Brian <unk> our CFO.
As you listen to today's conference call. We encourage you to have our press release and front of you, which includes our financial results as well as metrics and commentary on the quarter.
Please note unless otherwise stated all comparisons and this call will be against our results for the comparable period of 2019.
Our comments and responses to your questions reflect management's views as of today February <unk> 2021, 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 and 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 maybe materially affected by many factors, including fluctuations in foreign exchange rates changes and global economic conditions and customer spending world events the rate of growth of the Internet online commerce and cloud services and the various factors detailed in our filings with the SEC.
This guidance also reflects our estimates to date regarding the impact of the COVID-19 pandemic on our operations, including those discussed on our filings with the SEC and is highly dependent on numerous factors that we may not be able to predict or control, including.
And the duration and scope of the pandemic, including any recurrence.
Actions taken by governments businesses and individuals and response to the pandemic.
The impact of the pandemic on global and regional economies and economic activity work force staffing and productivity and our significant and continuing spending on employee safety measures our ability to continue operations and affected areas and consumer demand and spending patterns as well as the effects on suppliers creditors and third party sellers all of which are uncertain.
Our guidance also assumes among other things that we don't conclude any additional business acquisitions investments 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 Brian.
Thank you for joining us today I realize that you may have questions about the news, which we announced today and our press release.
I'd like to begin with some comments on Q4 results and then we can proceed to your questions.
First I would like to start by thanking the nearly $1 3 million Amazon employees, who have risen to the challenge of serving customers around the world. During this pandemic.
And we're proud that more than 500000 people chose to take new jobs at Amazon and 2020.
We're committed to providing all employees with great jobs, including $15 and now are starting to pay and the U S health insurance for <unk>, and matching leading parental benefits and upscaling opportunities.
We remain focused on the safety for employees and delivery partners, particularly in our fulfillment and logistics operations and stores as well as the customer is shopping and our whole foods market and other stores.
Our Q4 results include approximately $4 billion and Covid related operating costs, including additional employee pay during the holidays.
We continue to see productivity headwinds from physical separation and training of new employees and.
Of course investments and PPE for employees and enhanced cleaning for our facilities.
This Q4 spend brings our total COVID-19 related costs for the year to more than $11 5 billion.
Our teams worked hard and 2020 to ramp up in house COVID-19 testing capabilities that are incremental to those already available to the general public.
More than 700 employees are now being tested every hour and globally. We've built hundreds of COVID-19 testing sites and two labs.
We are encouraging our central employees working at Amazon fulfillment centers, AWS data centers and whole foods market stores across the country to receive the COVID-19 vaccine at the earliest appropriate time.
We're also working at the federal and state levels to support the vaccinations of frontline employees and those and the community who are providing essential services throughout the pandemic, including enabling pop up clinics, and Washington State and Florida with more on the way.
Now some comments on Q4 results our fourth quarter holiday season has always been the busiest time of our year.
This year presented additional challenges for our teams as we work to meet strong customer demand, while simultaneously growing our operations footprint and welcome and far more new employees and any prior Q4.
We welcomed nearly 175000, new full and part time employees and Q4 alone.
This compares with 50000 and Q4 of 2019.
We also continue to add buildings, and our fulfillment and logistics network with square footage growing about 50% year over year and 2020.
And unlike in a typical year when new buildings are mostly in place by the end of Q3. This year a significant number of them came online in Q4 as our teams pulled out all the stops to be ready for customer demand.
And it turns out we needed that capacity in order to fulfill the strong customer demand and Q4.
Revenue for the quarter was $125 $6 billion versus our guidance range of $112 billion to 121 billion.
You will remember that we kicked off the holiday season early for customers with Prime day in October versus its usual timing and Q3.
We then saw strong seasonal holiday demand through Q4.
Our Q4 results also largely reflect a continuation of demand trends, we have seen since the early months of the pandemic, particularly.
Particularly as people are staying at home.
Including for household staples and other home products.
We saw sales growth across from major product categories led by strong Prime member engagement.
Prime members continue to shop, with greater frequency and across more categories and before the pandemic began.
And members also continued to expand their usage of price digital benefits, including Prime video and Prime video channels.
Amazon music launched podcasts and September and in Q for Prime members listened to millions of hours of podcasts each month.
We're reaching more customers with our grocery offerings and.
And Q4, we had another strong quarter that largely reflects the continuation of demand trends from Q3.
And we saw strong growth and new prime members sign ups and.
Demand remains strong and the quarter the additional volume leverage helped to achieve higher than expected profits.
We saw strong order volumes throughout the holiday season with good sales growth not only on our peak sales days, which include Prime day, Black Friday, and cyber Monday, but also throughout the remainder of the quarter we.
And we had good operational performance within our fulfillment centers and transportation and network, even as we added significant capacity.
Third party sellers also stepped up as never before to serve customers.
For 2020 holiday season was the best ever for small and medium sized businesses selling and our store.
With their worldwide sales growing over 50% year over year and Q4.
Third party units represented 55% of total Kate units during the quarter.
<unk> unit mix, we've ever had since we invited businesses to sell on Amazon more than 20 years ago.
Lastly, aws's efforts for headlined by our ninth annual Reinvent conference. This is the first time and our history that the event was virtual and free.
We had over 570000 registered attendees during the three weeks long event.
AWS continues to innovate at a rapid clip and then.
Now seen more than a 180, new services and features at reinvest across compute storage database machine learning and more you can read more about this and our earnings release.
The team also announced significant customer momentum with new commitments and migrations from J P. Morgan Chase Thomson Reuters, Viacom CBS and Twitter just to name a few.
We continue to see companies meaningfully growing their plans to move to AWS.
And Q4, AWS saw a continuation of strong usage and revenue growth AWS added more revenue quarter over quarter and year over year and any quarter in its history and is now a $51 billion annualized run rate business supporting millions of active AWS customers.
And just as they have all year sellers partners and employers across Amazon stepped up to deliver on unprecedented customer demand and for this we remain extremely grateful.
And today, we announced our founder and CEO, Jeff Bezos will transition to the role of executive chair and the third quarter. This year and that Andy Jesse will become Chief Executive officer at that time.
For those of US you know Andy are excited to see and take on this greater responsibility.
Is a visionary leader, great operator, and he understands what makes Amazon such a special innovative company.
We're also excited and Jeff will routine and very important role at the company and he founded and has got it for over 25 years.
He has created a culture of invention and innovation that drives us every day and.
And we remain bound by a common focus and obsession on the customer.
With that let's move on to Q&A.
Thank you at this time, we will now open the call up for questions.
Each caller to please limit yourself to one question. If you would like to ask a question. Please press star one on your keypad. We asked that when you pose your question you pick up your handset to provide optimum sound quality once again to initiate a question. Please press star and then one on your Touchtone telephone and at this time please hold on.
We pull for questions.
Thank you. Our first question is coming from Heath, Terry with Goldman Sachs. Please proceed with your question.
Great. Thanks, just wanted to dig a bit deeper into the incredible acceleration that we saw and the international business.
Obviously.
Pandemic aside wondering if you could help us sort of breakdown.
And the pieces of what drove that specific regions.
And specific initiatives that.
And that drove that.
That level of acceleration.
And then just on the AWS business a bit more of a housekeeping question could you would you mind.
Going through just where the backlog stands and.
Any material drivers of changes and that to the extent there has been and.
Sure. Thank you Heath.
Let's start on the international segment results so yeah.
Yes, it was.
<unk> growth jumped from 33% and Q3 to 50% and Q4 part of that is the timing of Prime day.
But in the U S. It was less pronounced.
Sequential growth was 39% to 40% and northern North America segment. So there was something else going on at international and Q4, I would I would attribute it really to.
Government actions and Lockdowns that we saw especially in the U K and.
Europe.
Hi.
And that.
Hi.
Increased during the quarter Unfortunately for.
And for the economy.
But it did drive for higher sales on our site.
Also.
Larger impact of moving Prime day from Q3 to Q4 and and international just because.
And it's a little more nascent there.
Still ramping up but very strong very strong performance.
Yes. This is Dave on.
On the backlog number it's about $50 billion at the end of the year the.
And the balance and that's up about 68%.
Year over year, so and Thats one component of all the great work that the AWS is doing and of course you are seeing some.
Continued very strong growth strong usage and revenue growth there $51 billion annualized.
Run rate business, so it's continuing to grow at a meaningfully larger.
All right and then others out there and where we're at.
And really pleased with with the growth, we're seeing there and it's.
As Brian touched on at the opening.
Just a lot of good day.
Good engagement and innovation coming out of the re invent conference as well.
Our next question comes from Eric Sheridan with UBS. Please proceed with your question.
Thanks, So much for taking the question just following up on on some of the comments you made between the release and you are.
For opening comments, Brian wanted to know could you tease out how we should be thinking about the level of investments that are needed and between the mix of fulfillment versus where you want to go on the customer service side and the logistics and delivery side as you look out to 'twenty, one and obviously, it's going to be a very different year and 'twenty, one and what we saw on 'twenty, where you saw a surge.
And demand and a lot of capacity constraints that.
And that have opened up as the year comes on and there'll be sort of a tougher comp dynamic and youre going into the middle of 'twenty. One as you are lapping against that demand impact in 'twenty, one and how do we think about the levels of investment and Youll make where those investments are going to go and what that means for sort of confidence on the demand side or in the medium to long term. Thanks, so much.
Sure Eric.
Obviously, we had a large investment last year.
Fulfillment capacity, including transportation and 50% year over year.
I would say that and it's been 40, I believe its $44 billion on Capex.
Yes.
We're still working through our plans for 2021 I think the added complexity here is the range of outcomes certainly was the case in 2020, but even for 2021.
And Theres a lot question is too.
Continuation of Covid conditions Comping against.
Prior year <unk>.
Sometimes there are things and there that are definitely wouldn't repeat probably Phil.
And number of clubs, we sold and and wipes and things like that or.
And Peter monitors if people set up their at home offices.
But there is also a lot of people who engage more strongly with prime benefits in 2020, and we think that will have lasting impact both from.
Purchase frequency and Mount gay purchased use of digital benefits et cetera, So we're going to have to build.
For multiple scenarios and.
On this FC World.
Hard to turn that capacity how quickly. So generally means you wouldnt you may have to overbuild touch credit check the customer experience on transportation.
We made large investments and our transportation network in 'twenty and 'twenty without works not done yet we have a lot of continued expansion and so we.
We see that over definitely through 2021, I can't quantify it right now only I'm only giving guidance through Q1, right now and and we are still working through some of the plans as we do this time of year.
And then infrastructure will remain.
No.
Yes.
The healthy part of our investment as well, we're supporting and AWS business that is growing at a rapid clip, both and usage and and revenue for expanding regions globally.
And have a lot of upside and in that area talking with customers on that.
And their transition plans with cloud so.
And we definitely do not want to run out of capacity and.
And again, we work cannot do that so there could be a risk of forward spend in 2021.
As Judy uncertainty, but we'll see as we as we move through the year.
Our next question comes from Doug Anmuth with J P. Morgan. Please proceed with your question.
Doug Your line is open.
Please proceed with your question.
Alright.
Apologize, Brian and hoping you could talk more about the importance and CL Amazon logistics during the holiday season, if you could talk more about percentage of packages, perhaps shift from your fulfillment centers and.
And where this can go in coming years, and then also a quick comment on the Covid costs, you mentioned 2 billion and <unk> just curious how you think about it.
More on a full year basis with some of the puts and takes can be there. Thanks.
Yes.
So yes for the full year were.
And again $11 5 billion was our gross cost for.
2024.
Excuse me for billions of that and Q4, we see a step down to closer to $2 billion and Q1 and that compares with a $600 million spend.
And last Q1 is that a pandemic just started and we start that reacting and March and obviously the cost escalated and Q2 and Q3.
So if we look at the core components of that right.
Productivity.
Productivity drags from hiring so many new employees and also having physical separation that gets better all the time. It was it was exasperated a bit and Q4 because of all the new hires that we brought on over 170000 new people.
And that should moderate and that's why one other reasons that where we see a step down in Q.
One versus Q4, its volume related and also mix of employees.
After that we're going to have to see again.
Hopefully the vaccine gets.
Going everyone gets vaccinated and we return it.
And returned to normalcy that would be very helpful and a lot of fronts for everybody.
And if not there'll be a continuation of some of these cost I will say.
While we are very transparent or try to be on the costs that we're seeing.
Specifically around Covid there are some positive.
Things happening that counteract a bit of that.
At least for which the topline volume and.
And 2020 grew 37% on and FX neutral basis versus growing 22% and 2019.
And.
The fact that we've been running pretty full out since.
Arguably april but definitely into may.
And has created operating efficiencies of its own the counter balance the physical separation and the training of new employees.
There's a lot of moving parts and here we.
We're able to save about $1 billion and transportation cost this year excuse me in 2020.
Rob for virtually all travel was shut down and.
And our sales teams.
And new ways to reach customers, we'll see how that develops over time marketing although it.
Got back to probably a more healthy levels in Q3, and Q4 definitely was lower in Q2, as we work through some capacity issues and it wasn't it wasn't.
Fruitful to invest and marketing when you are having trouble.
Hitting cook.
Existing customer demand. So there are a lot of moving parts.
That I'll try and be.
And as transparent on as I can be during the quarter.
And this again Q1 is were seeing about $2 billion on.
Absolute dollar COVID-19 costs.
And Dave.
Dave can take the AAM sales question.
And just as we're talking about Amesville Amazon logistics right.
About that in terms of the facilities, it's a lot of the middle mile and the last mile elements.
That are under our management and control and so youre talking about sort centers at the middle mile delivery stations for the last mile.
And on a square footage basis 2020 was a big build here for us our footprint grew around 50% about half of that incremental square footage fit into that sort of NGL transportation.
My other question, which is a higher mix and what you've seen any incremental add.
And if higher mix being 50, 50, and what you see from us and the past so a lot of focus on that Theyre both because.
Desire to pre pandemic increase for one day.
And delivery capabilities for prime members.
But also as we move through this year.
Gives us a little bit more much more certainty on being able to get items from point a to point b. So we finished the year, we're now more than half our packages for U S and worldwide or are handled through mcl.
And a lot of.
Lot of work going into that and so.
Well look to expand and continue to build on that with our NGL offerings, but as we said in the past.
And.
Delivery partners independent delivery partners that are out there and the Ups's USPS is certainly.
Overseas carriers as well are an important part of that and they'll continue to help us scale that up and build out that offering and make it better.
Our next question comes from John Blackledge with Cowen. Please proceed with your question.
Alright, great. Thank you two questions first the other revenue line saw a significant acceleration in <unk> and just.
Curious if you can talk about or provide some further color on the advertiser demand that you saw on the fourth quarter and then second on grocery was a big driver for.
And for Amazon and 2020, just general thoughts on grocery and I think you mentioned and the.
Release.
Seven communities.
And rolled out Amazon fresh grocery stores, how are they performing and should we expect a broader rollout.
Sure John Let me start with the other revenue question, Yes, we saw strength and other revenue grew 64% and Q4 versus 49% and Q3 and 41% and Q2.
That is primarily advertising that's the majority of it.
I would I would say that.
And theres been a recovery and advertising spend as the year progressed.
And the fact that we moved prime day into Q4 has an impact here because again.
And carried a lot of.
Clicks and eyeballs into Q4 for that for this.
Time period.
But I want to highlight a lot of great work being done by the advertising team.
The main principle is to help sellers vendors authors publishers and partners use our tools navigate them as fluidly as possible and.
And.
And that value both for them and for our cash and customers, who get to see and find and discover new and different products.
And.
Theres some things that are adding to the efficiency of advertising. We're now using a deep learning model to show more relevant sponsored products and have had success with that we're improving the relevancy of that shown on the product detail pages. All the time and we've seen rapid adoption of video create creative format for sponsored brands.
And all these things help check up the conversion.
And the.
The productivity of the advertising both for the seller or vendor involved and also for Amazon and.
It makes it a more productive experience for the customer as well.
John on the grocery point, Yeah, we've got and we've got a couple of different formats I think theres. The go grocery has a couple of locations open on and off to a good start a lot of.
Interest and those from the technology and if those offer as well as the Amazon fresh location. So worried about eight locations open and I think guy and the neighborhood of about a half dozen locations are confirmed and hoping so.
And to come on those and Theres other.
Other kind of tangible footprint on that and the go stores, there's around 25 of those.
And that are out there that also and important part of that is true. So you see us. It's we've talked about this a bit and the passage.
We're doing a lot with online grocery and branching out from whole foods and some of the other physical footprint locations and being able to offer that convenience, but we also think that.
And being able to offer some innovative.
Physical store grocery offerings like I'll, just go and fresh and some of which have some some pretty cool.
Self checkout capabilities and implement some of the just walk out on <unk>.
<unk> qualities are really some interesting areas that are resonating with customers I think Dave.
And I appreciate that not just in times of maybe not wanting to have physical contact with everyone on the store, but just even beyond that the general convenience of being able to move throughout the store and and checkout more efficiently than you otherwise would and a traditional retail environment. So excited to do more on that front.
Our next question comes from Brian Nowak with Morgan Stanley. Please proceed with your question.
Thanks for taking my questions I have two the first one I'd be curious to hear about any of the learnings you had from the strength of the international business in 2020, and and how you think about the right types of investments to make and that business and 21 and beyond to ensure you retain as many of these users and wallets as you've gained.
And throughout 2020, and the second one.
Standing the the comments, Brian earlier about sort of investments going forward, maybe just talk to us a little bit about one day are these investments you're making could they get you back to a one day product and later part this year on 22, when the world Normalizes or are these assets you are putting in place now not able to be deployed for.
A one day perspective went overall ecommerce slows down a little bit.
Yeah.
Sure, Brian Let me start with your international question.
I think the biggest learning is that.
If we can move 2021 volume into 2020.
Good leverage for us and that's kind of what we saw there was.
And essentially a doubling of the growth rate.
Versus probably the going and time.
The rate for 2020, now again that was a very.
Heart volume because of the Covid.
And restrictions and issues with our workforce just.
Keeping our workforce safe and everything else, but I think what you saw with some.
Very high leverage on that model that over came some of the.
More fixed costs that we're seeing and the prime benefits. So pre invested as we've discussed in the past and things like video and devices and.
Other elements of the prime offering now grocery you'll share starting to see and we've added this prime benefits.
Head of probably the curve that you would've seen and North America.
That is always created a bit of a drag on operating income as well as investments and new geographies and investment in India. The investment that we've made over the last two or three years that are and places like the middle East.
Turkey, Brazil, Australia, and most recently, Sweden, and the Netherlands and 2020, so there's a lot of moving parts under the international and the International segment, but you are starting to see that.
The benefit of the higher volumes and with its higher advertising as well.
That we expected and we expect over time, and we will see the growth rate.
It's going to have the same challenges year over year that perhaps we'll see and North America, we're going to have.
Rob.
And between lapping things that.
May have been onetime in nature, and 2020 versus accelerating prime membership and prime members purchases purchase frequency and adoption of digital benefits. So we'll see.
You know what that looks like in 2021, and very happy with the performance in 2020.
And really hats off to the teams and many countries around the world who are all dealing with the same same issues that we were in North America.
And I know this.
A bit of an offshoot, but I just think it's worth mentioning it fits and the AWS business, but we're continuing to see strong growth from AWS around the world as well and there's a number of international.
Located customers out there.
And like Mockado Libre, and <unk> and others that we've listed on that.
And our great customers for us so we're working on that and.
We're really looking to support that this globally and I mentioned, this before but and our reinvent and was a great way to bring a lot of those folks from around the world together virtually and free and.
Typically we've recorded the revenue for Reinvents from ticket sales and sponsorships.
If you account for this COVID-19 and not only this year of event being virtual and free AWS is year over year revenue growth. If you look at it actually accelerated adjusting for that from the third quarter to the fourth quarter. So a lot of fun and innovation good innovation coming out of that event. If we're excited to talk talk more with customers about and.
And on your question on one day.
I believe it was.
With our investments will be consistent with.
And establishing higher and higher levels of one day, yes definitely.
And we've been doing that throughout the year and it's been getting better in fact, we had a lot of examples of deliveries right up to the last night and on December 24th and the United States for.
A holiday gifts. So the one day has been getting better and it's.
The issue in 2020 was essentially around capacity and volume and getting things out the door.
And being able to then hit a shortened time period. So it wasn't that we were delaying or slowing down the shipment itself. It was the the time taken to get through the warehouse and.
Handle the backlog with demand so as the year progressed, we did see that get better and better we do forecast and it will get better and not quantifying. This for you I realize that but I think you can generally notice wherever you are particularly or whatever geography or some.
Some cities are back.
<unk> two <unk>.
One day levels that they saw or even better pre pandemic.
Other areas that may have other dynamic issues.
And are.
We're still working their way out of backlogs and volume issues, but.
And when they when they the dust settles and as we open up more and more capacity, you'll see greater and greater one day percentages for a prime shipments.
Our next question comes from Justin Post with Bank of America. Please proceed with your question.
Great. Thank you a couple first obviously the Jeff Bezos announcement is quite important.
I think Jeff Wilkie is also retiring can you talk a little bit if you expect any changes to Amazon and how we should think about that and then maybe.
And maybe Dave Clark is taking over retail Tom.
A little bit about that and then secondly.
Obviously, the backlog is really strong and AWS up 68% the margins did come down a little bit quarter over quarter to 28 can you talk about the deals how pricing is in the cloud segment is it remaining robust and and any reason the margins came down a little bit quarter over quarter. Thank you.
Sure Justin let me start with your comments on the CEO transition and then the consumer's CEO transition I think they are both examples of.
What are highly effective succession planning processes at Amazon and the board of directors, obviously takes that very seriously.
It is and annual discussion and probably more often on succession plans development of key executives on.
Expanding the number of key executives et cetera, and.
And you'll see the byproduct of that as we expand the <unk> team.
As we five years ago set up the two CEO.
Structure, where Jeff will he was CEO of consumer and Andy Jass, He was CEO of AWS.
We have strong single threaded leaders on devices, Amazon video, including Amazon Studios.
Advertising and.
And so I think there's a.
A lot of bench strength within Amazon and generally we do try and push for the decisions down and the organization as we scale, especially in.
Internationally as we try and do.
Thanks, consistent globally, but.
Recognize.
Local differences and our model so having said all of that yes.
And the succession planning is super important.
The example, you saw with Jeff Wilkie, Jeff Jeff announced in the fall that he was stepping down to pursue some other goals and interests that he has outside of Amazon had been her over 20 years had.
Super.
Pivotal and our development of our consumer business our culture.
The development of layers and layers of leaders and one of them was Dave Clark who has over the last five plus years.
Really.
And charged with developing some very fundamental things for our company the expansion of the fulfillment Center network the expansion and creation of our transportation.
Capacity grocery delivery and court the grocery plan on.
A lot of other things, but Dave has.
Great leader and his own right, so when Dave or excuse me on what Jeff Wilkie decided to retire and the fall. It was a natural transition to Dave Clark and that just occurred in January and they are wrapping things up and the next month. So that's a successful example of succession planning and a successful transition.
And same.
Same thing for Jeff Bezos, this role and I and I will reiterate that Jeff is not leaving he is getting a new job. He is going to be executive chair of the board Super important role the board is superb.
And important and Amazon success story.
And Andy has been here since 1997, and he is not only and visionary leader. He is a strong operator as I said.
And he's got a great track record of developing multiple things and businesses within Amazon not the least of which is AWS, which is arguably.
And most profitable important technical technology company and the world.
And that's just a flavor on the insight on on how it works well.
We're very happy to see.
Both Jeff and Andy and get New perspective, So Andy has a chance to put his imprint on Amazon. He is certainly going to carry through.
The culture and the vision and the invention factory that Amazon is and we will take that for the next level, Jeff will be the executive chair on the board he will be involved in many large.
And one way door issues as well.
Say, one way doors, meaning.
The more important decisions things like acquisitions things like strategies and going into grocery and other things so.
Jeff has always been involved with that and that's where you know we'll keep his time focused on our he'll keep his time focused on and his new role so very excited.
All around to see.
<unk> ability to have a strong transition to Andy and Q3.
We'll be working on back filling the AWS role and and I will talk more about that and the future but for now today, it's about Andy and Jeff Bezos.
Adjusted and that's on your AWS point.
Like I've mentioned before AWS growth rates strong.
The factors, we've talked about and the path to continue to be in play and we're improving.
Infrastructure planning to meet the capacity needs given the growth we're seeing more broadly.
Results reflect that balance between the investing the price reductions and driving cost efficiencies and the margins are going to fluctuate quarter to quarter, depending on on those factors to the extent, we are investing in new regions and some other other elements a few discrete things that arent.
And you know probably new but just to call out.
And the driver of the.
Reduced impact from the change and the useful life for the servers you recall, we amended the server useful life for the beginning of the year.
For three years to for years and so we saw.
Some benefit to the AWS margins and the broader margins and total.
When we look at that.
The impact does diminish throughout this year so.
And we increased it beginning in January the benefit from this change and Q4 was about $538 million, that's down from $634 million and Q3. So it gives you some sense of it's it's coming down that's the total amount and allocated amongst the segments, but the majority of those figures I just gave do relate to to AWS because a significant for the server.
<unk> assets going to that segment and that impacts connect continue to taper down over time and for example and day.
On a 2021 one other element is just FX impact that's always going to hit us to some degree, but AWS customer billings are probably primarily denominated in U S dollars. The cost. So if you think about it and many of the costs are going to be for build out and local currency for data centers and the people that work there and power and what have you so theres a bit of for.
Aaron Exchange.
Difference, there and and that happens to be this time around a little bit bigger, we saw and unfavorable impact of about $96 million.
To the AWS margin this time around for FX. So just one other point to two on a.
Call out there and you mentioned the backlog to it yeah look I think that.
One data point.
Amongst many of as you look at AWS.
But I think we're really encouraged by just general large enterprise business adoption is continuing to do you know.
Well as they are choosing AWS and tech provider and speeding up innovations you saw a long list of the many companies that we've announced arrangements within the past 90 days. So really excited to continue to build on to that.
Our final question comes from Ross Sandler with Barclays. Please proceed with your question.
Hey, guys, Yeah, just going back to the topic and shipping cost inflation. This is one of the queue lines, and thats kind of variable and and kind of increasing.
Faster than and the other fixed costs.
And Dave you mentioned that over half the orders are now going through Amazon logistics worldwide. When do you expect that rate of inflation per order to level out a little bit because of these efforts and if you look at the cost curve and places like the UK, where or in London, where you have well over half.
On your own last mile delivery are you starting to see leverage there and any comments on on that and thanks a lot.
Yeah on that and this is Dave.
I think it's it's not I won't give a for kind of guidance from extra what that level as well as off like some of the step up and costs and disparity or the bigger GAAP I should say versus the unit growth rates that you're seeing there and there's a few factors that I think you know this is Q4, we did add on a lot of new capacity as I said it came on later in the year.
Into Q4, and more of it was and kind of that transportation arm and so the cost associated with that.
It would be going and that trans cost piece. So that's one of the factors along with the fact that we're continuing to try where we tend to focus on.
Improving one day and that varies region to region with all the challenges of Covid that have gone on this year, but thats a goal of ours is to get back to where we were in terms of one day unit mix and continue to build on to that so that'll be something too.
Keep an eye on as we.
Moving into 2021.
Yeah.
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