Q4 2021 Amazon.com Inc Earnings Call

February 3, 2022

Okay.

[music].

Thank you for standing by. Good day, everyone and welcome to the Amazon.comQ4, 2021 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 the Director of Investor Relations, Dave Files. Please go ahead.

Hello, and welcome to our Q4 2021 financial results conference call.

Joining us today to answer your questions is 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 2020.

Our comments and responses to your questions reflect management's views as of today February 3rd, 2022 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 uncertainty regarding the impacts of the COVID-19 pandemic.

Fluctuations in foreign exchange rates, changes in global economic conditions and customer demand and spending.

Inflation, labor market and global supply chain constraints, 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 impacts of the COVID-19 pandemic on our operations, including those discussed in our filings with the SEC.

Our guidance also 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 will turn the call over to Brian.

Thank you for joining us today.

Let me start by once they get acknowledging and thanking our employees around the world for their efforts.

This was the second holiday season during this pandemic and it required exceptional collaboration and coordination among our employees and business partners to prioritize both safety and customer experience.

The team did a great job of delivering for customers this holiday.

Now, let's discuss our fourth quarter financial results.

For the fourth quarter, net sales were $137.4 billion.

An increase of 10% year over year, excluding the impact of foreign exchange. We continue to focus on offering the best experience for our customers across our businesses.

On the consumer side, we welcomed millions of new Prime members in both the United States and international during the quarter.

We're continuing to see consistently high member renewal rates across geographies.

Our third party sellers in particular benefited from strong customer demand this holiday season.

[3P] sellers provided 56% of all unit sales in the quarter, the highest fourth-quarter mix ever.

And AWS saw continuation of the strong usage and revenue growth we've seen throughout 2021.

AWS added more revenue year over year that any quarter in its history.

And it's now a $71 billion annualized run rate business, up from $51 billion run rate one year ago.

Even on a large base, revenue increased 40% year over year.

As I've mentioned in prior calls, we also encourage you to look at the multi-year compounded annual revenue growth rate since the onset of the pandemic. To better put this revenue growth in perspective.

Despite lapping 2021's extraordinary sales growth, we continue to see an increase in customer demand and sales during the remainder of 2021, even as the economy opens back up. For Q4, Amazon's two-year annual compounded growth rate was 25% excluding impacts from foreign exchange consistent with our rate in the third quarter.

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We've invested significantly to keep pace with this demand.

Including nearly doubling our operational capacity in the past two years.

Our fulfillment center footprint, while adding significant transportation assets to ensure fast on-time delivery.

They are now 1.6 million Amazon employees worldwide also doubling in the two year period.

Our fourth quarter operating income was $3.5 billion.

As we mentioned in the last earnings call, we did see more than $4 billion in costs from inflationary pressures and loss productivity and disruption in our operations.

The inflation, primarily relates to wage increases in incentives and our operations as well as higher pricing from third party carriers supporting our fulfillment network.

Lost productivity and network disruptions were driven primarily by labor capacity constraints due to challenges in staffing up our facilities for peak.

This is driven by the very tight labor market in the second half of 2021.

And more recently by the emergence of the omicron variant.

We do expect these cost challenges to persist into Q1, albeit adjusted for lower seasonal volumes relative to the fourth quarter.

Our results also include approximately $1 billion year over year negative impact from lower fixed cost leverage our fulfillment network.

Recall that we saw very high unit volumes for most of 2020 and the first half of 2021.

And our fulfillment network was running at close to a 100% capacity during this time.

Now with more normal fulfillment capacity, our operating leverage decreases versus the comparable prior year periods.

We expect to continue to see some negative year over year impact from this in Q1 of 2022.

While we navigate these near term headwinds, the fundamentals of our retail business are strong.

And we are optimistic about number of growth businesses and a strong innovation pipeline.

AWS delivered another strong quarter of growth as enterprises and developers continue to look to AWS for critical innovative cloud solutions.

Now to $71 billion annualized revenue run rate.

AWS revenue grew 40% year over year in Q4, our fourth consecutive quarter of revenue growth rate acceleration.

We hosted our 10th re invent conference in the quarter welcoming 26,000 in-person attendees and hundreds of thousands who attended virtually.

Reinvent remains a highlight of the year for us because it's a great opportunity to introduce new services, while engaging with customers and partners to better inform where we should be focusing next.

We announced more than 115 new services and features during the event.

As businesses spanning all major industries continue to choose AWS as their technology provider to speed up innovation their organizations.

In the past quarter alone, NASDAQ announced a multiyear partnership to migrate North America's market AWS, including their matching engine.

That's by selected AWS as its preferred cloud provider for cloud infrastructure services.

Meta the parent company of Facebook, Instagram and Whatsapp selected AWS as its long term strategic cloud provider to accelerate artificial intelligence research and development.

As for Lantus, the parent company of Chrysler Dodge, Fiat and Jeep and Ram selected AWS as its preferred global cloud provider for vehicle platforms to accelerate new digital products and upskill its global workforce.

You can find more examples in our earnings release of the world's largest companies such as Adidas, Goldman Sachs, Pfizer [inaudible] and more are using AWS to transform their businesses.

Overall net income was $14.4 billion in the fourth quarter.

While we normally focus our comments on operating income, I'd point out that this net income includes a pretax valuation gain of $11.8 billion related to our common stock investment in Ruby in automotive, which completed its initial public offering in November.

Before we move to Q&A, there are three additional items I'll mention related to our disclosures.

First, we are now separating advertising services revenue from other revenue as part of our revenue disclosures by groups of similar products and services.

This updated presentation is provided in the supplemental financial information included in our earnings release.

Excited to continue innovating in areas like sponsored ads streaming video and measurement.

Of course, advertising only works if we make it useful for Amazon customers, when we create great customer experiences, we deliver better outcomes for brands.

Second, we're prospectively updating the useful life of our servers and networking equipment beginning in January.

As a practice, we monitor and review the useful lives of our depreciable assets on a regular basis to make sure that our financial statements reflect our best estimate of how long the assets are going to be used in operations.

We are increasingly useful life for servers from four years to five years and network equipment from five years to six years.

As a result, our first quarter guidance includes an approximate $1 billion of lower depreciation expense.

We expect the quarterly impact of this change to decrease throughout the year.

Although we are calling out an accounting change here. This really reflects a tremendous team effort by AWS to make our server and network equipment last longer.

We've been operating at scale for over 15 years. So we continue to refine our software to run more efficiently on the hardware.

There's been lowers stress on the hardware and extends the useful life both for the assets that we use to support AWS's external customers as well as those used to support our own internal Amazon businesses.

And finally, we will increase the price of prime in the United States in Q1.

We continue to make Prime better.

In recent years, we've added more product selection available with fast free unlimited shipping, more exclusive deals and discounts and more high-quality entertainment, including TV, movies, music and books.

Since 2018, Prime Video has tripled the number of Amazon originals.

And this September, Prime Video will also release the highly anticipated the Lord of the Rings, the rings of power and become the exclusive home of Thursday night football as part of an historic 11 year agreement with the National Football League.

Since 2018 in the US. Availability is same day delivery has expanded from 48 metropolitan areas to more than 90.

Items available for Prime free shipping have increased over 50%.

And members have saved billions of dollars shopping on Prime days.

This is all on top of new program benefits like prescription savings and fast free delivery from Amazon pharmacy, and the continually growing Amazon music catalog for prime members.

As well as prime reading and Prime gaming.

With the continued expansion of Prime member benefits.

And the increased member usage that we've seen as well as the rise in wages and transportation cost.

Amazon will increase the price of Prime membership in the United States with the monthly price going from $12.99 to $14.99.

And the annual membership going from $119 to $139.

This is our first price increase since 2018.

For new Prime members, the price change will go into effect on February 18th.

For current Prime members, the new price will apply after March 25th on the date of the next renewal.

With that, let's move on to Q&A.

Thank you. At this time, we will open up for questions. We ask 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 ask 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 then one on your touchtone telephone at this time. Please hold while we poll for questions. Thank you.

Our first question is coming from Eric Sheridan with Goldman Sachs. Please proceed with your question.

Thanks so much for taking the question, but wanted to come back to the comments in the release by Andy on same-day delivery. Can you talk a little bit about how many of those investments might be behind you versus ahead of you with respect to same-day delivery and how that sets the company up with respect to either

consumption behavior by consumers versus the competitive dynamic you're seeing against elements like omnichannel and last mile delivery competitors? Thanks so much.

Hi, Eric sure thing.

So on a same day again, there's multiple levels of fast shipping here from

ultra fast, which is essentially our grocery business in one to two hours to

Same day and last and then one day and two day Prime.

We feel good about where. We are continuing to

Built capacity that enables us to hit those cutoffs.

Hi.

I think his comments were more around getting us back to our.

Pre pandemic levels for one-day delivery and improving upon that and then getting same day to more and more metropolitan areas, we're doing that globally as well.

We really think that that combination of speed.

For different product levels, product lines

Clients It gives me.

Really resonates with customers.

And there's a lot of new offers for generally free shipping on

There's a lot of new offers for free or excuse me generally free shipping on <unk>.

fast basis.

We know how hard this is.

And our goal is to do it.

Do it at a price that we can make money on as well and how our cost structure commensurate with that. So that's where the difficult where it comes in but we like the progress we've made developing our Amazon logistics capability over the last few years.

And we've been adding as we've mentioned we've doubled the capacity in the network over the last two years.

<unk> been adding as we've mentioned we've doubled the capacity in the network over the last two years.

It is not all just to handle today's volume, it's also to handle.

Getting closer to the customer.

And being able to ship faster. So we like where we stand. We know there's work to do on improving our customer service.

We like the progress that we're making lately.

We think the future is bright on that dimension.

Our next question is from Brian Nowak with Morgan Stanley. Please proceed with your question.

Thanks for taking my questions. I have two, Brian. The first one is there's a lot this changed within the retail business sort of pre-pandemic post-pandemic, more same day, more and more grocery more last mile investments and an ad business.

Curious to hear as you sort of think about the long term profitability of the retail segment. Is your view about how you think about long term profitability or cash flow of retail fallen at all post-pandemic because of the higher required investments? The first one. And then the second one, like the new disclosure I'd be curious for.

Any other disclosure about the number of engineers or the size of the teams you are working on a lot of the innovation that you talked about that are sort of more around early-stage non-revenue generating projects, we can better understand that investment in Amazon.

Sure.

On the second one.

We have a history of making long term bets for customers and some of those fall into very small short term revenue businesses. They all generally roll up into other revenue.

What you see is very small.

After we've separated out advertising, so I think that.

You do see it in our revenue disclosure generally.

But a lot of our pofitability is shown at the segment level and we'll continue to do that with the revenue disclosure.

Profitability is shown at the segment level and we'll continue to do that with the revenue disclosure.

Ask about the business model I think it's a good question.

And we are as we reflect over the last two years.

We are encouraged by a lot of things. You check them off there. The adoption of digital benefits, the use of grocery and how valuable that's become to customers not to mention the acceleration of companies going to the cloud.

The ability to double our.

Fulfilment capacity over that time period, including making major strides in our Amazon logistics sets us up well for the future.

And we.

We've been also dealing with a lot of disruption during this time period. So the early with disruption was handling volume without the capacity to handle that and then quickly playing catch up and as that was starting to improve labor took a turn in the United States, especially labor availability and we've really had.

Scrambled to add workers, we've been successful at it we added.

Over 273,000 employees in the last half of last year.

But I think if you look at the prior year was over 400,000, so there's a.

A lot of expansion that's been going on the network and we feel good about the basic.

Contributors of profitability.

If you step back, there's procurement margin and working with vendors and sellers as well. There's fees in some cases for 3P services and Prime. So you just mentioned is going up.

Back theirs.

Procurement margin and working with vendors and sellers as well there's fees in some cases for <unk> services and Prime. So you just mentioned is going up.

Advertising has certainly added layer contribution over the last few years.

But again, that only works and is the only successful if we make it.

A good customer experience. So we're really working hard to do that and that becomes a part of our ability to offer lower prices.

Better selection and more convenience.

So if you take those, those are all.

Stable in strengthening areas, it's really the onus on us is to get our operational efficiency back in all of our areas of cost we have.

Again built a lot of capacity, we've hired a lot of people.

Some of those people are still all our teams are all battling omicron right now, but we do see the sun coming out and getting better here over the next.

Number of quarters, and that's going to be.

Where are we going to put a lot of our effort.

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

Thanks for taking the question, Brian, you doubled your fulfillment network and also your head count over the past two years I believe you're about two and a half years into this investment cycle, whereas Amazon in terms of emerging from this investment cycle can you see a slowdown in that big investment spending this year.

Yes, let me, let's talk a little bit about.

Capital expenditures.

And I'm going to do this with inclusion of equipment finance leases, which is the.

Residual that we sometimes lease on our infrastructure assets. We're doing less of it now, but we still do some have done it historically so when you look at those numbers and how they've grown over the last few years.

I'll give you the proportions, which I'm not sure. We've initially shown before is about 40% just under 40% of that Capex is going into infrastructure most of achieving AWS, but also

I'll give you the proportions, which I'm not sure. We've initially shown before is about 40% just under 40% of that Capex is going into infrastructure most of achieving AWS, but also <unk>.

Certainly Amazon is.

Large customer of that as well as we build infrastructure for ourselves directly or through AWS about just under 30% as fulfillment capacity building warehouses.

Warehouse only not transportation and then just under 25% is.

Transportation capacity and building out our NCL network, principally globally, the remaining 5% or so is small things like offices and

Stores and other capital areas, but those are the three main areas if I look to the future. We're still working through some of our plans for 2022.

Capital areas, but those are the three main areas if I look to the future. We're still working through some of our plans for 2022.

But it's coming into focus a bit. We see the.

Capex for infrastructure going up. We still have a very fast-growing business, that's growing globally and we're adding regions.

Capacity to handle.

Usage of that still exceeds revenue growth in that business.

So feel good about making those investments.

On the fulfillment center side.

The top 30% of the spend in the last few years, we see that moderating and that will probably.

Now match growth of our underlying businesses. I think theres always things that can tick up that growth rate things like expansion of

Our.

Our underlying businesses I think theres always things that can tick up that growth rate things like <unk>.

our FBA business.

Expansion of cube that maybe not be different than the square footage. So yes, there is.

We want to have capacity to have a healthy.

Retail and FBA business, because that is fuel as prime and one-day delivery and two-day delivery and same-day delivery. So that's very important but we see the FCPs.

Likely moderating this year.

And then the third piece is transportation, we still see additional levels of investment in that in 2022. So it's a.

If you wrap that up.

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We expect Capex, including equipment finance leases to increase year over year.

I can't give you the exact percentage but.

Hopefully, that gives you a little more dynamic on how we approach it.

Our next question is from Mark Mahaney with Evercore ISI. Please proceed with your question.

Yeah.

Okay. Thanks.

You've laid out all of these costs that you were expecting to see in the.

In the December quarter.

Just talk to whether there were any real surprises to you. So it looks like you had a little bit greater leverage than you may have thought and then use that to help us think about what the.

I think you said the sun's coming out.

Financially, does that mean that we're going to have a kind of nice improvement in operating margins as we go through the year? And some of those temporary costs, you don't get temporize and you'd get to absorb some of the more fixed cost. So just talk about where the surprise was in terms of those costs that you laid out for the December quarter, the $6 billion and how should we should think about those playing out as we go forwards.

Thanks a lot.

Hey, Mark just remember that I'm sitting in Seattle. So my view of the sun's coming out is a little different than perhaps where you are.

We do see things improving.

Let's step back to Q4.

We had said that we would have.

About $4 billion of additional costs due to labor shortages and the inefficiencies of that cause as well as increased labor rates and shift differentials of premiums.

External transportation costs.

We came in just slightly over that $4 billion. I think things went as expected I would say that.

Just slightly over that $4 billion I think things went as expected I would say that.

The hiring was strong but we could have done better we could have had more people. So we had to cover.

There was additional overtime.

There was some higher costs on third party transportation.

Higher costs on third party transportation.

But all in all, the challenge in Q4 was to staff.

Or excuse me increase the staffing and we said we wanted to add 150,000 people or more we added net net about 140,000 in the quarter.

273,000 the 2nd half of the year. So as you turn the page into 2022.

We feel good better about labor, except omicron has kicked up and now you have a different type of labor issue, where there's a lot of people who are on leave of absences and short term as they work to have a positive test on COVID-19 and can get back into the workforce and protect their fellow.

Workers so.

There is instances, where you're paying twice or three times for the same labor hour. If someone is on leave you are paying them and you're also paying potentially for someone who is covering the shift on over time.

Instances, where youre paying twice or three times for the same labor hour. If someone is on leave you are paying them and you're also paying potentially for someone who is covering the shift on over time. So.

There's cost pressure in Q1.

I think the good news is that the labor where we're.

The labor challenge is not as great in Q1 as it is in Q4 and Q3 and Q4. So we're hopeful on that we have to work to make our operations more efficient as we.

Get staffing levels up.

And we're going to plough a lot of our effort into increasing our transportation speeds and beating our pan pre-pandemic levels. So there's a lot of different challenges going on right now.

The team has been working.

Heads down for over two years now.

So they need.

We've got a great team and we have confidence that we will.

Things will improve as we get through the year.

So hopefully that answers your question.

Our next question is from Colin Sebastian with Baird. Please proceed with your question.

Thanks, and hey, Brian and Dave.

I wanted to ask about AWS and nice acceleration in revenues there. I'm wondering if you could talk about maybe more specifically the drivers that acceleration is the application layer, maybe now a large enough where you're seeing that contributing incrementally to growth.

And I think in the release you also highlighted infrastructure expansion globally, I think it might be interesting to add some context around the scale.

Or distribution of the AWS business internationally outside of North America, if you could put some context around that, thank you.

Sure, Colin. Thanks for your questions.

On the growth rate, I think it's a combination of things, we've been adding resources and sales and marketing over the last few years and that is starting to pay off.

There was some cutback in spending in the early parts of 2020 that we're lapping.

As people, different companies have different COVID-19 experiences, some, their volumes went through the roof. Some, their volumes going through the floor. So as things have stabilized I think.

The lasting thing is that a lot of people made the commitment to go to the cloud.

Better understood the benefits of that and probably accelerated their internal timelines for that. And we're there to help and we're working very hard to.

Benefits of that and probably accelerated their internal timelines for that and we're there to help and we're working very hard to.

Make that journey a successful one and we have a strong team of sales and marketing professionals to help as well as technical advisors.

Technical advisors.

That is.

What we're seeing and we're pleased with the acceleration of the business the last four quarters.

We will see also, we're also pleased with the efficiency of the

Infrastructure investment as I've mentioned.

The expansion of useful life is not done.

On an accounting basis, unless you have proof that it's actually, we're seeing it in real life.

Very positive indicators in AWS.

Hey, Collyn.

It's Dave, you just following up on the international point, what we're seeing outside of the US. I mean, we are.

As part of that overall strong growth, we are continuing to see considerable momentum really around the world.

Customers moving their workloads over to AWS.

At different phases, and so as you look at the release some of the other announcements.

There is a good diverse list of companies, Adidas in Germany migrated SAP.

Environments AWS and then other ones [still Anthos] selected AWS as their preferred cloud provider, there's a number of really great companies examples.

Companies examples.

Doing different big things at different stages of that migration.

What's been important to us amongst many things is continuing to expand our global infrastructure footprint really to support this momentum we're seeing. So just this last fourth quarter in the fourth quarter, we opened.

The Asia Pacific region over in Jakarta.

We've got announcements for plans to launch in Canada in Calgary region next year or perhaps in 2022 or 2024.

A lot of work and a lot of momentum there. Those are just a few examples but where we sit now, AWS has 84 availability zones in 26 regions

26 <unk>.

around the world right now. And just in terms of the forward-looking roadmap, we have announced to launch 24 more zones and 8 more regions.

And those will be here in the next couple of years.

A couple of years.

Our next question is from Jason [Helfstein] with Oppenheimer. Please proceed with your question.

Yes.

Thanks. So I just wanted to dig a little bit into third party seller services.

The growth slowed there even on a two-year stack. So maybe if you could talk about some of the factors that you think could be weighing on that and then just on AWS you kind of laid out some.

Some color there.

Is there any bottleneck to growth that you're still seeing? I mean, you talk about why.

That's a very good quarter, and having to do with some of the comp, but any bottleneck to growth either supply chain or employee-related. Thank you.

Sorry, Jason, is your second question on AWS?

Yes, on AWS. Okay.

Let me start with that.

Yes, sorry, let me start with that.

We don't see bottlenecks on the capacity side.

Bottlenecks on the capacity side or.

I'd probably the limit or in that businesses, our ability to work with customers to accelerate their timelines.

So we're investing and working hard to do that.

So.

But operationally, we continue to add capacity.

Continue to add capacity.

I mentioned on the capital section our capital discussion.

And we expect that to increase year over year in 2022.

On 3P, I think what you're seeing is a decrease in growth rate.

The.

No.

I think what Youre seeing is.

Decreasing growth rate.

Much like the rest of the business as I mentioned earlier.

We're dealing with a very high growth period from Q3 of 2020 through Q1 of 2021.

So.

But on a two-year basis, you're still saying, 31% compounded annual growth in the 3P seller services revenue.

Granted that was in the.

It was 34% last quarter, but it's maintaining.

I think the bigger point is that sellers were definitely pick winners in Q4, the percentage of units up to 56% was a record for 3P.

We continue to invest a lot to make sellers help sellers be successful on our site there.

They are a big consumer of advertising as well because they use it to build their brands and add.

It enables customers to see their selection and make purchases. So we're very, very happy with the third-party seller services businesses.

And again, looking for ways to help sellers be successful.

Our next question is from Justin Post with Bank of America. Please proceed with your question.

Great, maybe I'll talk about advertising services.

Maybe tell us why you decided to break it out if you haven't already and then how much Prime day might have been a factor in the deceleration, but bigger picture, how much room does that line has to grow bigger than GMB growth? How do we think about where you are on penetration on that? Thank you.

Yes, let me start with why we broke it out.

We have.

We've looked at the proportion of other revenue that is advertising services and we've got to a point where has it been pretty much mentioning every quarter that for the majority of that line item was advertising revenue and we feel it's at a certain size that.

The proportion of other revenue that is advertising services and we've got to a point where has it been pretty much mentioning every quarter that for the majority of that line item was advertising revenue and we feel it's at a certain size that.

We should break it out and split the other off of that so that was really.

Split the other off of that so that was really.

The impetus for the change and we look at those things every year.

And end of year was a good time to do it as we start 2022. So hopefully, that's helpful for you to understand the growth rate without having to.

Impute it from the other revenue.

The growth rate in the quarter, 33%.

Quarter, 33%.

It was down from 66% in Q4 of last year Q4 last year, obviously had prime day in it for.

The first time and Prime day carries a lot. I can't scale it for you, but there's a lot of advertising tied to prime day, obviously, so when that moves quarters.

It generally has an impact on the run rates.

We saw that a bit in Q2 of this year. When we did have Prime day it was lapping.

Q2, 2021, it was lapping the, 2020 period that didn't have a prime day in it.

2020, 'twenty period that didn't have a prime day in it.

So that will move around a bit but I think the bigger story here is the success, we're having with sellers and vendors and making that a useful product for customers.

Bigger story here is the success, we're having with with sellers and vendors and making that a useful product for customers.

And just to add to that.

The priority with advertising at a high level, it's improved the tool usability.

At a high level, it's it's improve the tool usability.

We think there's great feedback loop with customers as Brian mentioned to keep building and making that better.

Great feedback loop with customers as Brian mentioned to keep building and making that better.

That results in building more relevancy and better engaging experiences and again.

The more we can interact with the advertisers, the customers and learn and half have more opportunities to hear from them and understand that we can build.

Better analytic tools to provide better measurement.

Give them better insight to performance, so really focused on serving brands.

And it's in the sponsored ads space, but we've talked about video advertising is certainly a great opportunity and as we've got properties like fire TV.

IMDb TV, Twitch, live sports a lot of exciting things that have been going on live sports and certainly to come.

This year as well both in the NFL here in the US. But overseas in a number of properties really excited to kind of work with folks and again. This is about delivering good recommendations to customers and helpful when they're making their purchase decisions and giving them information around that. And that in turn, of course, helps the advertisers as well and have a great result, so I think that's one.

One area that we're excited about longer term.

Demand side platform opportunities with Amazon's DSP.

It's just something that we're continuing to work on and refine.

And again, focus on the customer as we always do.

Our next question is from John Blackledge with Cowen. Please proceed with your question.

Great. Thanks, two questions. First.

Could you discuss how supply the supply chain affected the business in 4Q? And how we should think about perhaps impacts from supply chain issues in 1Q '22 and for the year? And then second question would be. Do you expect to increase our prime pricing in non-US markets? Thank you.

Hi, John. Thank you for your questions. First one on.

Prime question.

We evaluate each country differently. We look at the relative price to the customer versus our cost of supply of that and the usage and the value that we're creating for our customers.

We felt especially after not raising the price in the United States since 2018 that the time was right to raise it.

Especially after not raising the price in the United States since 2018 that the time was right to raise it and.

And we think it's a much more valuable program today than it was in

2020, let alone 2018.

Other countries will continue to evaluate.

Every year and nothing else to announce right now. On supply chain, there is specific things that I think we all see in the supply chain, where we're waiting for products, but as far as Amazon is concerned.

There is.

Specific things that I think we all see in the supply chain, where we're waiting for products, but as far as Amazon is concerned.

We did a lot to combat the supply chain issues we saw in Q4 or anticipated in Q4. The bottled product ahead, we work with vendors to secure inventory early in some cases paid earlier.

Which had a working capital impact.

We also worked very hard to open up channels of existing channels of input into the country, whether it was port capacity or.

Open up channels of.

Existing channels of <unk>.

into the country, whether it was port capacity or.

Vessel capacity. So we did everything we knew how to as far as trying to get more capacity in a constrained market.

And we think it worked for our customers in Q4.

As challenges remain in '20, I wouldn't say, we're we've totally past that but we don't expect it to be a big issue in Q1.

Our final question is from Dan Salmon with BMO capital markets. Please proceed with your question.

Yeah.

Good afternoon, good evening guys.

Thanks for [inaudible].

First, I just wanted to follow up a little bit and see the advertising numbers. If there's any qualitative color that you could add, say rough balance performance advertising versus brand advertising, maybe US versus rest of the world.

Anything you add could be great.

And then just second.

Brian, you mentioned the exclusive broadcasting of Thursday night football.

And it's one of the reasons supporting a higher price increase for Prime. Dave, you mentioned it is an element that.

It is a dynamic new one for the advertising business, maybe could we just return to that point.

Sort of. Horton of live sports in the video space is incredibly important because that one that you see kind of taking the business to a new level at this stage.

Horton of live sports in the video space is incredibly important because that one that you see kind of taking the business to a new level at this stage.

Sure. Let me start with that second question. So I didn't want to leave you with the impression that we raised prices because if there's a football I just use that as an example of great new content that we've been investing in for prime members to make the prime membership.

More valuable as well as international Sports we had.

One of the highest rated games in Q4 with.

Ladies Manchester United and I'm.

And the mix at the <unk> sorry.

Personal auto yeah, I won't embarrass myself, but.

So again, we've been working on.

It's getting sports properties that will be beneficial and valuable to prime prime offering.

We're still probably early on and that we've had obviously success with.

Premier League soccer.

Other soccer leagues around the World tennis properties and also probably the Mark He is the work with the NFL on Thursday night football.

Janet in terms of just a breakout.

As we've said before on advertising side, the sponsored products and brands they make up the majority of the revenue.

Our revenue today, we havent given a split.

On a geographic basis, but suffice.

Sorry to say.

A lot of these efforts as Brian talked about whether it's on the video.

Advertising opportunities for in the sponsored products is sponsored brands efforts we've.

Replicated a lot of the tools and features and services around the world and our.

Kind of constantly learning and building out the brand and the presence with that.

So we can make better in roads with with customers over the long term.

And I.

Didn't want to leave you hanging Dan the Manchester, United and Arsenal Soccer game in December was the most watched Premier League match ever on our service with an estimated viewership of $4 million. So I think that is actually pretty interesting because we've had a lot of increasingly.

Good.

Relationship with the Premier League, we've had boxing take gains and we.

We continue to be a valuable partner.

For each other.

With that thanks for joining us on the call today and for your questions. A replay will be available on our IR website for at least three months. We appreciate your interest in Amazon and look forward to speaking with you again next quarter.

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Q4 2021 Amazon.com Inc Earnings Call

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