Q4 2023 Amazon.com Inc Earnings Call

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Operator: AMZN Good day, everyone. AMZN.com, time. Today's call is, Any remarks? call.

Good day, everyone and welcome to the amazon.comfourth quarter 2023 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 Vice President of Investor Relations Mr. Dave.

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Dave: Sir Please go ahead.

Dave: Hello, and welcome to our Q4 2023 financial results conference call joining us today to answer your questions as Andy Jaffe, our CEO and Brian <unk>, 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.

Dave Fildes: Hello, and welcome to our Q4 2023 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 2022. Our comments and responses to your questions reflect management's views as of today, February 1st, 2024 only, and will include forward-looking statements. However, actual results may differ materially.

Dave: Unless otherwise stated all comparisons in this call will be against our results for the comparable period of 2022.

Dave: Our comments and responses to your questions reflect management's views as of today February one 2024, only and will include forward looking statements actual results may differ materially.

Dave Fildes: 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, It's not possible to accurately predict demand for our goods and services, and therefore, our actual results could differ materially from our guidance. Now, I'll turn the call over to Andy.

Dave: 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.

Dave: 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.

Dave: Our guidance incorporates the order trends that we've seen to date and what we believe today to be appropriate assumptions.

Dave: Our results are inherently unpredictable and maybe materially affected by many factors.

Dave: Alluding fluctuations in foreign exchange rates changes in global economic and geopolitical conditions and customer demand and spending including the impact of recessionary fears.

Dave: Equation 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.

Dave: Our guidance assumes among other things that we don't conclude any additional business acquisitions restructurings or legal settlements.

Dave: It's not possible to accurately predict demand for our goods and services and therefore, our actual results could differ materially from our guidance.

Dave: And now I'll turn the call over to Andy.

Andy Jassy: Thanks, Dave. Today we're reporting $170 billion in revenue, up 13% year-over-year excluding the impact of foreign exchange rates, $13.2 billion in operating income, up 383% year-over-year, or $10.5 billion, and $35.5 billion in trailing 12-month free cash flow adjusted for equipment finance leases, up $48.3 billion year-over-year. While we've made meaningful progress on our financial measures, what we're most pleased about is the continued customer experience improvements across our businesses. These results represent a lot of invention, collaboration, discipline, execution, adjusting, and reimagining from teams across Amazon. Looking back at Q4, I'll start with our stores business, where customers responded to our continued focus on selection, price, and convenience. We continue to have the broadest retail selection with hundreds of millions of products available and added tens of millions of new items last year alone, including fashion selections from Coach, Victoria's Secret Fashion, Pit Viper, and Beyonce's Renaissance Tour merchandise, to cosmetics from Lancome, Urban Decay Cosmetics Being sharp on price is always important, but particularly in an uncertain economy, where customers are careful about how much they're spending. We kicked off the holiday season with Prime Big Deal Days, an exclusive event for Prime members to provide an early start on holiday shopping.

Andy Jaffe: Thanks, Steve today, we're reporting $170 billion in revenue up 13% year over year, excluding the impact from foreign exchange rates $13 2 billion and operating income up 383% year over year, or 10, 5 billion and $35 $5 billion in trailing 12 month free cash flow adjusted for equipment finance leases.

Up $48 3 billion year over year.

While we've made meaningful progress in our financial measures. What we're most pleased about is the continued customer experience improvements across our businesses. These results represent a lot of invention collaboration disciplined execution, adjusting and re imagining from teams across Amazon.

Andy Jaffe: Looking back at Q4, I'll start with our stores business, where customers responded to our continued focus on selection price and convenience.

Andy Jaffe: We continue to have the broadest retail selection with hundreds of millions of products available and added tens of millions of new items last year alone, including fashion selection from coach victorious secrets fashion pit Viper and balance is Renaissance tour merch to cosmetics from lancome urban decay, it cosmetics and no beauty by Vanessa Hudgens too.

Andy Jaffe: Consumer technology and services from boost infinite and whoop to Homewares from Martha Stewart.

Andy Jaffe: Being sharp on price is always important, but particularly in an uncertain economy, where customers are careful about how much they're spending we kicked off the holiday season with prime Big deal days, an exclusive event for prime members to provide an early start on holiday shopping. This was followed by our extended Black Friday, and cyber Monday holiday shopping event, which was open to all.

Andy Jassy: This was followed by our extended Black Friday and Cyber Monday holiday shopping event, which was open to all customers and ended up being our largest event ever. These events also helped attract new customers and Prime members. Throughout the quarter, customers saved nearly $10 billion across millions of deals and coupons, almost 70% more than last year. In addition to offering great deals, we continue to improve delivery speeds. In 2023, Amazon delivered to Prime members at the fastest speeds ever, with more than seven billion items arriving same or next day, including more than four billion in the U.S. and more than two billion in Europe. In the U.S., this result is the combination of two things.

Andy Jaffe: Customers and ended up being our largest event ever these.

Andy Jaffe: These events also helped attract new customers and prime members throughout the quarter customers saved nearly $10 billion across millions of deals and coupons almost 70% more than last year.

Andy Jaffe: In addition to offering great deals, we continue to improve delivery speeds in 2023, Amazon delivered to prime members at the fastest speeds ever with more than 7 billion items, arriving same or next day, including more than 4 billion in the U S and more than $2 billion in Europe and.

Andy Jaffe: In the U S. As a result as the combination of two things one is the benefit of regionalization, where we re architected the network to store items closer to customers. The other is the expansion of same day facilities were in the U S. In the fourth quarter, we increased the number of items delivered the same day or overnight by more than 65% year over year.

Andy Jassy: One is the benefit of regionalization, where we re-architected the network to store items closer to customers. The other is the expansion of same-day facilities, where in the U.S., in the fourth quarter, we increased the number of items delivered the same day or overnight by more than 65% year-over-year. As we're able to get customers items this fast, it increases the number of occasions that customers choose Amazon to fulfill their shopping needs. And we can see that in all sorts of areas, including how fast our everyday essentials business is growing. Our regionalization efforts have also brought transportation distances down, which has helped lower our cost to serve. In 2023, for the first time since 2018, we reduced our cost to serve on a per-unit basis worldwide. In the U.S. alone, cost to serve was down by more than 45 cents per unit compared to the prior year.

Andy Jaffe: As we're able to get customers items. This fast it increases the number of occasions that customers choose Amazon to fulfill their shopping needs and we can see that in all sorts of areas, including how fast are everyday essentials business is growing.

Andy Jaffe: Our regionalization efforts have also brought transportation distances down which has helped lower our cost to serve.

Andy Jaffe: In 2023 for the first time since 2018, we reduced our cost to serve on a per unit basis globally in the U S and cost to serve is down by more than 45 cents per unit compared to the prior year.

Andy Jaffe: Lower cost to serve allows us not only to invest in speed improvements, but also afford adding more selection at lower average selling prices or asps and profitably we.

Andy Jaffe: We have a saying it's not hard to lower prices, it's hard to be able to afford lowering prices.

Andy Jassy: Lowering the cost to serve allows us not only to invest in speed improvements but also to afford adding more selection at lower average selling prices or ASPs and profitably. We have a saying, it is not hard to lower prices; it's hard to be able to afford lowering prices. The same is true with adding selection. It's not hard to add lower ASP selection.

Andy Jaffe: The same is true with adding selection isn't that hard to add lower a S. T selection, it's hard to be able to afford offering lower asp's selection is still like the economics like.

Andy Jaffe: Improving speed, adding selection puts us in the consideration set for more purchases.

Andy Jaffe: As we look toward 2024 and beyond we're not done lowering our cost to serve we've challenged every closely held belief our fulfillment network and reevaluated every part of it and found several areas, where we believe we can lower costs, while also delivering faster for customers, our inbound fulfillment architecture, and resulting inventory placement or areas of folk.

Andy Jassy: It's hard to be able to afford offering lower ASP selection and still like the economics. Like improving speed, adding selection puts us in the consideration set for more purchases. As we look toward 2024 and beyond, we're not done lowering our cost to serve. We've challenged every closely held belief in our fulfillment network and reevaluated every part of it, and we found several areas where we believe we can lower costs while also delivering faster for customers. Our inbound fulfillment architecture and resulting inventory placement are areas of focus in 2024, and we have optimism there's more upside for us. Alongside our stores business, our advertising growth remains strong, up 26% year-over-year, which is primarily driven by our sponsored ads. We've recently added sponsored TV to this offering in the U.S., a self-service solution for brands to create streaming TV campaigns with no minimum spend, putting this advertising within the reach of any business.

Andy Jaffe: Because in 2024, and we have optimism theres more upside for us.

Andy Jaffe: Alongside our stores business, our advertising growth remained strong up 26% year over year, which is primarily driven by our sponsored ads we've.

Andy Jaffe: We've recently added sponsored television to this offering in the U S. Our self service solution for brands to create streaming TV campaigns with no minimum spend putting this advertising within reach of any business. While it's still early days streaming TV advertising continues to grow quickly.

Andy Jaffe: Brands are using our capabilities to reach engage viewers on Twitch Freebie fire TV and Prime video shows and movies, which just launched in the U S as well as Thursday night football.

Andy Jaffe: Shifting to AWS revenue in the quarter grew 13% year over year in Q4 versus 12% year over year in Q3, and we're now approaching an annualized revenue run rate of $100 billion.

Andy Jaffe: We watched the incremental revenue added each quarter and in Q4, AWS added more than $1.1 billion in incremental quarter over quarter revenue, which on a FX neutral basis is more than any other cloud providers as far as we can tell.

Andy Jassy: While still early days, streaming TV advertising continues to grow quickly. Brands are using our capabilities to reach engaged viewers on Twitch, FreeVie, Fire TV, and Prime Video shows and movies, which just launched in the U.S., as well as Thursday Night Football. Shifting to AWS, revenue in the quarter grew 13% year over year in Q4, versus 12% year over year in Q3. And we're now approaching an annualized revenue run rate of $100 billion. We watched the incremental revenue added each quarter, and in Q4, AWS added more than $1.1 billion in incremental quarterly over quarterly revenue, which on an FX-neutral basis is more than any other cloud provider as far as we can tell.

Andy Jaffe: While cost optimization continued to attenuate larger new deals also accelerated evidenced by recently inked agreements with Salesforce BMW, Nvidia LG Hyundai Merck M U F G.

Andy Jaffe: Aksyonov Cathay BYD, a core Amgen and SAIC.

Andy Jaffe: Our customer pipeline remains strong as existing customers are renewing at larger commitments over longer periods and migrations are growing.

Andy Jaffe: 2023 also was a very significant year of delivery and customer trial for generative AI or Gen. AI and AWS you may remember that we've explained our vision of three distinct layers in the G&A I stack each of which is gigantic and each of which were deeply investing.

Andy Jaffe: At the bottom layer, where customers who are building their own models run training and inference and compute where the chip is the key component in that compute.

Andy Jaffe: We offer the most expansive collection of compute instances with Nvidia chips.

Andy Jaffe: We also have customers, who would like us to push the price performance envelope and AI chips, just as we have with gravitas for generalized CPU chips, which are 40% more price performance and other X 86 alternatives and as a result, we build custom AI training chips named training and inference chips, namely friendship.

Andy Jassy: While cost optimization continued to attenuate, larger new deals also accelerated, evidenced by recently inked agreements with Salesforce, BMW, NVIDIA, LG, Hyundai, Merck, MUFG, Axiata, Cathay, BYD, Accor, Amgen, and SAIC. Our customer pipeline remains strong as existing customers are renewing at larger commitments over longer periods and migrations are growing. 2023 also was a very significant year of delivery and customer trial for generative AI or Gen AI in AWS. You may remember that we've explained our vision of three distinct layers in the Gen AI stack, each of which is gigantic and each of which we're deeply invested in. At the bottom layer, where customers who are building their own models run training and inference on compute, where the chip is the key component in that compute, we offer the most expansive collection of compute instances with NVIDIA chips. We also have customers who would like us to push the price performance envelope on AI chips, just as we have with Graviton for generalized CPU chips, which are 40% more price performant than other x86 alternatives. And as a result, we've built custom AI training chips named Tranium and inference chips named Inferentia.

Andy Jaffe: And reinvent we now training them to which offers four times faster training performance and three times more memory capacity versus the first generation of training them.

Andy Jaffe: Abeline advantageous price performance versus alternatives.

Andy Jaffe: We already have several customers using our AI chips, including Anthropic, Airbnb hugging phase Quadrex Ricoh and snap.

Andy Jaffe: In the middle layer, where companies seek to leverage an existing large language model customize it with their own data and leverage AWS security. Other features all as a managed service.

Andy Jaffe: We've launched bedrock, which is off to a very strong start with many thousands of customers using the service after just a few months.

Andy Jaffe: The team continues to rapidly iterate on bedrock recently delivering capabilities, including guardrails to safeguard will questions applications will answer knowledge basis to expand models knowledge base with retrieval augmented generation, a rag and real time queries.

Andy Jaffe: <unk> to complete multi step task and fine tuning to keep teaching and refining models, all of which will help customers applications, the higher quality and have better customer experiences.

Andy Jassy: At the re-event, we announced Tranium 2, which offers four times faster training performance and three times more memory capacity versus the first generation of Tranium, enabling advantageous price performance versus alternatives. We already have several customers using our AI chips, including Anthropic, Airbnb, Hugging Face, Qualtrics, Ricoh, and Snap. In the middle layer, where companies seek to leverage an existing large language model, customize it with their own data, and leverage AWS's security and other features, all as a managed service, we've launched Bedrock, which is off to a very strong start with many thousands of customers using the service after just a few months. The team continues to rapidly iterate on Bedrock, recently delivering capabilities including guardrails to safeguard what questions applications will answer, We also added new models from Anthropic, Cohere, Meta with Lama 2, Stability AI, and our own Amazon Titan family, Velolam.

Andy Jaffe: We also added new models from Anthropic, Cohere Mehta with Lama to stability, AI and our own Amazon tightened family they'll of Ams.

Andy Jaffe: But customers have learned at this early stage of Gen. AI is that theres meaningful iteration required in building a production Gen AI application with the requisite enterprise quality at the costing latency needed customers don't want only one model.

Andy Jaffe: They want different models for different types of applications and different size models for different applications.

Andy Jaffe: Customers want a service that makes this experimenting and iterating simple and this is what bedrock does which is why so many customers are excited about it.

Andy Jaffe: At the top layer of the stack is the application layer one of the very best early Gen AI applications as a coating companion.

Andy Jaffe: And reinvent we launched Amazon Q, which is an expert on AWS writes code the Bugs code test code.

Andy Jaffe: Translations like moving from an old version of Java to a new one and can also query customers various data repositories like intranets wikis or from over 40 different popular connectors to data and Salesforce Amazon S. III service, now slack and Atlassian or Zen desk, among others and answer questions summarize this.

Andy Jaffe: Data Carryon, a coherent conversation and take action.

Andy Jaffe: He was designed with security and privacy in mind from the start making easier for organizations to use generally they I safely Q is the most capable work assistant and another service that customers are very excited about by the way don't underestimate the point about bedrock in Q inheriting the same security and access control as customers.

Andy Jassy: What customers have learned at this early stage of Gen AI is that there is meaningful iteration required in building a production Gen AI application with the requisite enterprise quality at the cost and latency needed. Customers don't want only one model. They want different models for different types of applications and different size models for different applications.

Andy Jaffe: Yet with AWS.

Andy Jaffe: Security is a big deal and an important differentiator between cloud providers. The data in these models is some companies most sensitive and critical assets.

Andy Jaffe: With AWS is advantaged security capabilities and track record relative to other providers, we continue to see momentum around customers wanting to do their long term journey I work with AWS.

Andy Jassy: Customers want a service that makes this experimenting and iterating simple. And this is what Bedrock does, which is why so many customers are excited about it. At the top layer of the stack is the application layer, one of the very best early Gen AI applications as a coding companion. At reInvent, we launched Amazon Q, which is an expert on AWS, writes code, debugs code, tests code, does translations, like moving from an old version of Java to a new one, and can also query customers' various data repositories, like intranets, wikis, or from over It was designed with security and privacy in mind from the start, making it easier for organizations to use generative AI safely.

Andy Jaffe: We're building dozens of Gen AI apps across Amazon's businesses.

Andy Jaffe: Several of which have launched others of which are in development. This morning, we launched Rufus and expert shopping assistant trained on our product and customer data that represents a significant customer experience improvement for discovery.

Andy Jaffe: This lets customers ask shopping journey questions like what is the best golf ball to use for better spend control.

Which are the best cold weather rain jackets, and get thoughtful explanations for what matters and recommendations on products you can carry on a conversation with Rufus on other related or unrelated questions and it retains context coherently you.

You can see through our rich product pages by asking roof as questions on any product features and it'll return answers quickly.

Andy Jaffe: At the start of what Rufus will do with further personalization and expansion coming but we're excited about how it will make discovery even easier on Amazon.

Andy Jaffe: Jan AI is and will continue to be an area of pervasive focus and investment across Amazon, primarily because there are few initiatives if any they give us the chance to reinvest so many of our customer experiences and processes and we believe it will ultimately drive tens of billions of dollars of revenue for Amazon over the next several years in <unk>.

Andy Jassy: Q is the most capable work assistant in another service that customers are very excited about. By the way, don't underestimate the point about Bedrock and Q inheriting the same security and access control as customers get with AWS. Security is a big deal and an important differentiator between cloud providers. The data in these models is some of the companies' most sensitive and critical assets. With AWS's advantaged security capabilities and track record relative to other providers, we continue to see momentum around customers wanting to do their long-term Gen AI work with AWS. We're building dozens of Gen AI apps across Amazon's businesses, several of which have launched, and others of which are in development. This morning, we launched Rufus, an expert shopping assistant trained on our product and customer data that represents a significant customer experience improvement for discovery. It lets customers ask shopping journey questions like, "What is the best golf ball to use for better spin control?". Which are the best cold weather rain jackets?

Andy Jaffe: Addition to our stores and AWS businesses, we continue to make progress in newer business investments that have the potential will be important to customers and Amazon longterm.

Andy Jaffe: Touching on two of them.

Andy Jaffe: October we had a major milestone in our journey to commercialize project Kuyper, which is our low Earth orbit satellite initiative that aims to provide broadband connectivity to the 400 to 500 million households, who don't have it today.

Andy Jaffe: We launched two and and prototypes satellites into space and successfully validated all key systems and subsystems made a two way video call streamed to Prime video movie in Ultra HD for K <unk> made an Amazon purchase over our end to end communication network, it's rare to be able to exercise all of these elements in an initial.

Andy Jaffe: Launch like this.

Andy Jaffe: We're on track to launch our first production satellites in the first half of 'twenty 'twenty four and started beta testing in the second half of the year we.

Andy Jaffe: We've still got a long way to go but are encouraged by our progress.

Andy Jassy: And get thoughtful explanations for what matters and recommendations on products. You can carry on a conversation with Rufus on other related or unrelated questions, and it will retain the context coherently. You can sift through our rich product pages by asking Rufus questions on any product features, and it will return answers quickly.

Andy Jaffe: During the quarter. We also completed our second season of Thursday night football, which was a rousing success by all accounts.

Andy Jaffe: Customer experience continued to improve as our talent production streaming quality analytics.

Andy Jaffe: Unique AI features like Prime vision in defense of alerts all took big leaps forward on top of the very good start last year.

Andy Jaffe: Launched a new NFL tuition with the inaugural Black Friday football game.

Andy Jassy: We're at the start of what Rufus will do, with further personalization and expansion coming, but we're excited about how it'll make discovery even easier on Amazon. Gen AI is and will continue to be an area of pervasive focus and investment across Amazon, primarily because there are few initiatives, if any, that give us the chance to reinvent so many of our customer experiences and processes. And we believe it will ultimately drive tens of billions of dollars of revenue for Amazon over the next several years. In addition to our stores and AWS businesses, we continue to make progress on newer business investments that have the potential to be important to customers and Amazon long term. Let's touch on two of them. In October, we hit a major milestone in our journey to commercialize Project Kuiper, which is our low-Earth-orbit satellite initiative that aims to provide broadband connectivity to the 400 to 500 million households who don't have it today. We launched two end-to-end prototype satellites into space and successfully validated all key systems and subsystems, made a two-way video call, streamed a Prime Video movie in Ultra HD 4 It's rare to be able to exercise all these elements in an initial launch like this.

Andy Jaffe: Our continuous innovation resonate with viewers as the number of people watching increased 24% year over year and with advertisers as we made dramatic year over year gains in AD sales, we have increasing conviction that prime video can be a large and profitable business on its own and will continue to invest in compelling exclusive content for prime members like Thursday.

Andy Jaffe: Football Garner the rings Reacher, Mr and Mrs Smith, Citadel, and more and with the addition of ads and Prime video will be able to continue investing meaningfully in content over time.

Andy Jaffe: I'll close by reiterating a 2023 was a really good year and grateful to all of our teams who delivered on behalf of customers. Yet I think every one of US at Amazon believes this is just the start of what's possible.

Andy Jaffe: We have a long way to go in every one of our businesses before we exhaust how we can make customers' lives better and easier and there is considerable upside in each of the businesses in which we're investing with that I'll turn it over to Brian.

Brian: Thanks, Andy.

Brian: Overall, we saw strong performance in the fourth quarter worldwide revenue was $170 billion, representing an increase of 13% year over year, excluding the impact of foreign exchange and.

Brian: Approximately $3 billion above the top end of our guidance range.

Brian: So our highest quarterly worldwide operating income ever which was $13 $2 billion for the quarter, an increase of $10.5 billion year over year and $2 $2 billion above the high end of our guidance range for.

Brian: For the full year 2023, we had a meaningful improvement across our financial results.

Andy Jassy: We're on track to launch our first production satellites in the first half of 2024 and start beta testing in the second half of the year. We've still got a long way to go, but we are encouraged by our progress. During the quarter, we also completed our second season of Thursday Night Football, which was a rousing success by all accounts. The customer experience continued to improve as our talent, production, streaming quality, analytics, and unique AI features like Prime Vision and Defensive Alerts all took big leaps forward on top of their very good start last year. We launched a new NFL tradition with the inaugural Black Friday football game.

Brian: Revenue was $574.8 billion, an increase of 12% year over year, excluding the impact of foreign exchange.

Operating income tripled year over year to $36 $9 billion.

Brian: Trailing 12 month free cash flow adjusted for equipment finance leases was $35.5 billion up $48 $3 billion versus last year.

Brian: His financial outputs are a result of a lot of improvements in our key input metrics such as stores cost to serve which decreased year over year for the first time since 2018.

Andy Jassy: And our continuous innovation resonated with viewers as the number of people watching increased 24 percent year over year, and with advertisers as we made dramatic year over year changes in games and ad sales. We have increasing conviction that Prime Video can be a large and profitable business on its own and will continue to invest in compelling exclusive content for Prime members like Thursday Night Football, Go to the Rings, Reacher, Mr. and Mrs. Smith, Citadel, and more. And with the addition of ads in Prime Video, we'll be able to continue investing meaningfully in content over time. I'll close by reiterating that 2023 was a really good year.

Brian: And in our ability to deliver to customers that are fastest speeds ever.

Brian: I want to thank our customers our partners and our teammates around the world for a very strong 2023 performance.

Focusing on the fourth quarter North America revenue was $105.5 billion, an increase of 13% year over year, and an acceleration of 200 basis points compared to Q3 <unk>.

Brian: International revenue was $40 $2 billion, an increase of 13% year over year, excluding the impact of foreign exchange also an acceleration of 200 basis points compared to Q3.

Brian: During the quarter, we remained focused on the inputs that matter most to our customers.

Brian: <unk> selection and convenience.

Brian: Shopping events throughout the quarter included Prime Big deal days in October and our extended Black Friday, and cyber Monday shopping event.

Andy Jassy: And I'm grateful to all of our teams who delivered on behalf of customers. Yet, I think every one of us at Amazon believes this is just the start of what's possible. We have a long way to go in every one of our businesses before we exhaust how we can make customers' lives better and easier, and there is considerable upside in each of the businesses in which we're investing. With that, I'll turn it over to Brian. Thanks, Andy.

Brian: Help to attract new prime members and deliver billions and savings for customers.

Brian: We made meaningful progress on delivery speeds in United States and globally, which helped strong sales throughout the quarter, including notable strength in the last minute gifting or ability to provide fast shipping helped our prime members and ensure that they've got their gifts for the holidays.

Brian: These improvements in delivery speed have led to increased purchase frequency by our prime members across all of our major geographies.

Brian Olsavsky: Overall, we saw strong performance in the fourth quarter. Worldwide revenue was $170 billion, representing an increase of 13% year over year, excluding the impact of foreign exchange, and approximately $3 billion above the top end of our guidance range. We saw our highest quarterly worldwide operating income ever, which was $13.2 billion for the quarter, an increase of $10.5 billion year over year, and $2.2 billion above the high end of our guidance range. For the full year 2023, we had meaningful improvements across our financial results. Revenue was $574.8 billion, an increase of 12% year-over-year, excluding the impact of foreign exchange. Operating income tripled year-over-year to $36.9 billion. Trailing 12-month free cash flow adjusted for equipment finance leases was $35.5 billion, up $48.3 billion versus last year.

Brian: It also strengthened demand for our everyday essentials categories, like beauty and health and personal care, where speed is even more important to customers.

Brian: Third party sellers were a big part of our success over the holidays with worldwide third party seller services revenue growing at 19% year over year, excluding the impact of foreign exchange and worldwide third party seller unit mix was 61% its highest level ever.

Brian: Also saw strong performance in worldwide advertising, which grew 26% year over year, excluding the impact of foreign exchange the strength in advertising was primarily driven by sponsored products as our teams work hard to increase the relevancy. The ads, we show customers by leveraging machine learning.

Advertising only works if the ads are helpful to customers and there is a lot of value in tailoring sponsored products, so they're relevant to what our customers actually searching for.

Brian: We're also continually focus on improving our measurement capabilities, which allow brands to see the payback of their advertising spend.

Brian: Shifting to profitability North America segment operating income was $6 $5 billion, an increase of $6 $7 billion year over year, resulting in an operating margin of six 1%.

Brian Olsavsky: These financial outputs are a result of a lot of improvements in our key input metrics, such as Stores Cost to Serve, which decreased year over year for the first time since 2018, and our ability to deliver to customers at our fastest speeds ever. I want to thank our customers, our partners, and our teammates around the world for a very strong 2023 performance. Focusing on the fourth quarter, North America revenue was $105.5 billion, an increase of 13% year-over-year and an acceleration of 200 basis points compared to Q3. International revenue was $40.2 billion, an increase of 13% year over year, excluding the impact of foreign exchange, also an acceleration of 200 basis points compared to Q3.

Brian: Up 120 basis points quarter over quarter.

Brian: So it's North America operating margins were at their recent low levels in Q1 of 2022, we've now seen seven consecutive quarters of improvement, resulting in a cumulative improvement of 800 basis points over these past seven quarters.

Brian: In addition to the strong top line growth, which helped to drive improved leverage throughout our businesses, we continue to make progress in reducing our cost to serve.

Brian: The fourth quarter's our busiest time of year supported by an increasingly large and integrated operations network.

Brian: Overall, our teams executed extremely well, yielding strong efficiency gains with minimal disruptions.

Brian: We were pleased with the performance of our Regionalized network during the holiday period, where we saw benefits from improved inventory placement, helping drive faster speeds and also lowering costs.

Brian Olsavsky: During the quarter, we remain focused on the inputs that matter most to our customers, price selection, and convenience. Shopping events throughout the quarter included Prime Big Deal Days in October and our extended Black Friday and Cyber Monday shopping event, helping to attract new Prime members and deliver billions in savings for customers, who made meaningful progress on delivery speeds in the United States and globally, which helped to strong sales throughout the quarter, including notable strength in last-minute gifting, where our ability to provide fast shipping helped our Prime members ensure that they got their gifts before the holidays. These improvements in delivery speed have led to increased purchase frequency by our Prime members across all of our major geographies. It also strengthens demand for our everyday essentials, categories like beauty and health and personal care, where speed is even more important to customers.

Brian: Also continue to see benefits from lower transportation rates, which include line haul Ocean and rail and from a more stable labor market, resulting in improved staffing levels.

Brian: In our international segment, we had an operating loss of $419 million, an improvement of $1.8 billion year over year. This improvement was primarily driven by lowering our cost to serve through increased units per box lower transportation rates and leverage across our fixed costs as we continue to focus on customer inputs and improve efficiencies.

Within our operations.

Brian: The international segment represents more than 20 countries have varying degrees of growth.

Brian: In our largest established countries like the UK, Germany, and Japan relatively strong revenue growth contributed to the year over year improvement in profitability. Additionally.

Additionally, we saw good progress in our emerging countries as they continue to expand their customer offerings, while seeking to invest wisely.

Brian: Moving to AWS revenues were $24 $2 billion, an increase of 13% year over year.

Brian Olsavsky: Third-party sellers were a big part of our success over the holidays, with worldwide third-party seller services revenue growing at 19% year over year, excluding the impact of foreign exchange. Worldwide third-party seller unit mix was 61%, its highest level ever. We also saw strong performance in worldwide advertising, which grew 26% year over year, excluding the impact of foreign exchange. The strength in advertising was primarily driven by sponsored products, as our teams work hard to increase the relevancy of the ads we show customers by leveraging machine learning. Advertising only works if the ads are helpful to customers, and there's a lot of value in tailoring sponsored products so they are relevant to what a customer is actually searching for.

Brian: On a quarter over quarter basis, we added more than $1.1 billion of revenue in AWS as customers are continuing to shift their focus towards driving innovation and bringing new workloads to the cloud.

Brian: Similar to what we shared last quarter, we continue to see the diminishing impact of cost optimizations and as these optimization slowdown we're seeing more companies turning their attention to newer initiatives and re accelerating existing migrations.

Brian: Customers are also excited about our approach to generative AI.

Brian: It's still relatively early days, but the revenues are accelerating rapidly across all three layers and our approach to democratizing AI is resonating well with our customers.

Brian: We have seen significant interest from our customers wanting to run generated of AI applications and build large language models and foundation models.

Brian: All with the privacy reliability and security they have grown accustomed to with AWS.

Brian Olsavsky: We're also continually focused on improving our measurement capabilities, which allow brands to see the payback of their advertising spend. Shifting to profitability, North America segment operating income was $6.5 billion, an increase of $6.7 billion year over year, resulting in an operating margin of 6.1%, up 120 basis points quarter over quarter. Since North America operating margins were at their recent low levels in Q1 of 2022, we have now seen seven consecutive quarters of improvement, resulting in a cumulative improvement of 800 basis points over these past seven quarters. In addition to the strong top-line growth, which helped to drive improved leverage throughout our businesses, we continue to make progress on reducing our cost to serve. The fourth quarter is our busiest time of year, supported by an increasingly large and integrated operations network.

Brian: W. S. Operating income was $7 $2 billion, an increase of $2 billion year over year.

Brian: Our operating margin for the quarter was 29, 6% up more than 500 basis points year over year, and effectively flat on a quarter over quarter basis.

Brian: This margin improvement reflects our head count reductions from earlier in the year and a slowdown in the pace of hiring.

Shifting to free cash flow on a trailing 12 month basis free cash flow adjusted for finance leases was $35.5 billion, an improvement of $48 $3 billion year over year, the largest driver of the improvement in free cash flow is our increased operating income, which we are seeing across all three of our segments.

Brian: We're also seeing improvements in working capital, notably in inventory efficiency driven by our regionalization efforts.

Brian: Next let's turn to capital investments, we define our capital investments is a combination of Capex plus equipment finance leases and.

Brian: In 2023 full year, Capex was $48 $4 billion, which was down $10.2 billion year over year, primarily driven by lower spend on fulfillment and transportation.

Brian Olsavsky: Overall, our teams executed extremely well, yielding strong efficiency gains with minimal disruptions. We were pleased with the performance of our regionalized network during the holiday period, where we saw benefits from improved inventory placement, helping drive faster speeds and also lowering costs. We also continue to see benefits from lower transportation rates, which include line haul ocean and rail and from a more stable labor market, resulting in improved staffing levels. In our international segment, we had an operating loss of $419 million, an improvement of $1.8 billion year over year.

Brian: As we look forward to 2024, we anticipate capex to increase year over year, primarily driven by increased infrastructure capex support growth of our AWS business, including additional investments and generative AI and large language models.

Brian: One thing I'd like to highlight in our first quarter guidance is that we recently completed a useful life study for our servers and we are increasingly useful life from five years to six years beginning in January 2024.

Brian: We will have this anticipated benefit to our operating income of approximately $900 million in Q1, which is included in our operating income guidance.

Brian Olsavsky: This improvement was primarily driven by lowering our cost to serve through increased units per box, lower transportation rates, and leverage across our fixed costs, as we continue to focus on customer inputs and improve efficiencies within our operations. The international segment represents more than 20 countries of varying degrees of growth, and our largest established countries like the UK, Germany, and Japan. Relatively strong revenue growth contributed to the year over year improvement and profitability. Additionally, we saw good progress in our emerging countries as they continue to expand their customer offerings while seeking to invest wisely. Moving to AWS, revenues were $24.2 billion, an increase of 13% year over year. On a quarter-over-quarter basis, we added more than $1.1 billion of revenue in AWS as customers are continuing to shift their focus towards driving innovation and bringing new workloads to the cloud. Similar to what we shared last quarter, we continue to see the diminishing impact of cost optimization.

Brian: As we turn the calendar 'twenty 'twenty four we are excited to continue upon the great work. The teams have been able to deliver in 2023.

Brian: <unk> focus on streamlining and prioritizing projects and an effective way that reduces costs and also allows us to continue innovating and inventing for customers.

Speaker Change: With that let's move on to questions.

Speaker Change: At this time, we will now open the call up for questions. We ask each caller to please limit yourself to one question.

Speaker Change: He would like to ask a question. Please press star one on your keypad.

Speaker Change: We ask that when you pose your question you pick up your handset to provide optimum sound quality.

Speaker Change: Once again to initiate a question. Please press Star then one on your Touchtone telephone at this time.

Speaker Change: Please hold while we poll for questions.

Speaker Change: Thank you. Our first question comes from the line of Eric Sheridan with Goldman Sachs. Please proceed with your question.

Eric Sheridan: So much for taking my question is I'm, just going to do a two parter on AWS.

Eric Sheridan: Take a step back can you talk a little bit about the contribution from backlog conversion AI workloads and some elements that allowed you to reaccelerate revenue with AWS in Q4 and that we should think about those components from an exit philosophy standpoint into 2024, and then against your broader comments on Capex any color on how we should be.

Eric Sheridan: Think about AI, driven capex within the AWS initiatives against the broader Capex commentary. Thank you.

Eric Sheridan: Exactly.

Eric Sheridan: Yes.

Eric Sheridan: Yes, that's right. This is Dave just to give you that.

Dave: The balance was $155 7 billion as of 12 31. So that's.

Brian Olsavsky: And as these optimizations slow down, we're seeing more companies turning their attention to newer initiatives and re-accelerating existing migrations. Customers are also excited about our approach to generative AI. It's still relatively early days, but revenues are accelerating rapidly across all three layers, and our approach to democratizing AI is resonating well with our customers. We've seen significant interest from our customers wanting to run generative AI applications and build large language models and foundation models, all with the privacy, reliability, and security they've grown accustomed to with AWS. AWS operating income was $7.2 billion, an increase of $2 billion year over year. Our operating margin for the quarter was 29.6%, up more than 500 basis points year-over-year and effectively flat on a quarter-over-quarter basis. This margin improvement reflects our headcount reductions from earlier in the year and a slowdown in the pace of hiring. Shifting to free cash flow, on a trailing 12 month basis, free cash flow adjusted for finance leases was $35.5 billion, an improvement of $48.3 billion year over year.

Dave: More than $45 billion year over year, and $20 billion quarter over quarter.

Dave: And then if you look back at the.

Dave: Revenue growth accelerated to 13, 2% in Q4 as we just mentioned.

Speaker Change: That was an acceleration we expect salary.

Speaker Change: Celebrating trends to continue into 2024.

Speaker Change: We're excited about.

Speaker Change: And migrate to continue resumption I guess migrations that companies may put on hold.

Speaker Change: During 2023 in some cases.

Speaker Change: Interest in our generative AI.

Speaker Change: Products like bedrock in Q as Andy was describing that on the Capex side, Let me talk in total for the company, we had $48 billion.

Speaker Change: 2023 was down $10 billion.

Speaker Change: Year over year.

Speaker Change: Talked about during the year quite a bit a lot of them.

Speaker Change: Mix of inverse.

Speaker Change: Investment in 2023 was tied to infrastructure infrastructure, mostly supporting AWS, but also supporting our core Amazon businesses.

Speaker Change: About 60% of our spend.

Speaker Change: We reached a very high percentage.

Speaker Change: Those trends continuing into 2024 Capex will go up in 2024, I'm not giving a.

Speaker Change: Number today.

Speaker Change: And we're still working through plans for the year, but we do expect capex to rise as we add capacity in AWS four region expansion primarily.

Speaker Change: Work, we're doing to generative AI projects.

Speaker Change: In the fulfillment center and logistics area I would say, it's more incremental capacity at this point based on additional demand. Although we are seeing some additional investments for same day delivery sites Automd.

Brian Olsavsky: The largest driver of the improvement in free cash flow is our increased operating income, which we are seeing across all three of our segments. We're also seeing improvements in working capital, notably in inventory efficiency driven by our regionalization efforts. Next, let's turn to capital investments. We define capital investments as a combination of capex plus equipment finance leases.

Speaker Change: Automation robotics.

The trend for <unk>.

Speaker Change: Most of the large percentage of that.

Speaker Change: Then we'll be in infrastructure is going to continue into 2024.

Speaker Change: Got a few things to what Brian said I think just as it relates to the first part of the question.

Speaker Change: Just the way to think about.

Speaker Change: Backlog conversion is just these are deals that we signed.

Speaker Change: Our long term deals typically with customers and then there is some amount of time it takes where we work with those customers to migrate workloads and so.

Brian Olsavsky: In 2023, full-year capex was $48.4 billion, which was down $10.2 billion year over year, primarily driven by lower spend on fulfillment and transportation. As we look forward to 2024, we anticipate CAPEX to increase year over year, primarily driven by increased infrastructure spending to support growth of our AWS business, including additional investments in generative AI and large language models. One thing I'd like to highlight in our first quarter guidance is that we recently completed a useful life study for our servers, and we are increasing the useful life from five years to six years beginning in January 2024. We will have this anticipated benefit to our operating income of approximately $900 million in Q1, which is included in our operating income guidance.

Some of the trends that we've seen over the last quarter first of all I think that the lion's share of cost optimization as happens, it's not that there won't be any more that we don't see any more but it just attenuated very significantly and at the same time, what we've seen is that migrations and this speaks to some.

Speaker Change: Backlog.

Speaker Change: <unk> that we're proceeding, but maybe not at the pace that we saw before it started to pick up again.

Speaker Change: We've also seen that a number of the deals.

Speaker Change: That typically signed more quickly, but we're signing more slowly in more uncertain environments.

Operator: As we turn the calendar to 2024, we are excited to continue the great work the teams have been able to deliver in 2023. We remain focused on streamlining and prioritizing projects in an effective way that reduces costs and also allows us to continue innovating and inventing for customers. With that, let's move on to questions. At this time, we will now open the call. We ask each caller to please stand by for a moment of silence until all have been given a chance to speak, to ask. Star.

Speaker Change: A lot of those got done in the last quarter and you heard in my opening remarks, some of the examples but that was some of several and we're continuing to see that trend.

Speaker Change: And then on the Gen AI side.

Speaker Change: If you look at the Gen. Eight Gen. AI revenue, we have an absolute numbers, it's a pretty big number but in the scheme of the $100 billion annual revenue run rate business is still relatively small much smaller than what it will be in the future, where we really believe we're going to drive.

Dave Fildes: AMZN, Our first question is from Eric Sheridan. Thank you so much for taking the questions. I'm just going to do a two-parter on AWS. If we take a step back, can you talk a little bit about the contribution from backlog conversion, AI workloads, and some elements that allowed you to re-accelerate revenue at AWS in Q4, and that we should think about those components from an exit velocity standpoint into 2024? And then, against your broader comments on CapEx, any color on how we should be thinking about AI-driven CapEx within the AWS initiatives against your broader CapEx commentary? Thank you. Yeah, that's right. This is Dave, just to give you that figure. AMZN, $5.7 billion. 1231.

Speaker Change: Tens of billions of dollars of revenue over the next several years, but it's encouraging how fast it's growing and our offering is really resonating with customers.

Speaker Change: And the next question comes from the line of Brian Nowak with Morgan Stanley. Please proceed with your question.

Brian Nowak: Great. Thanks for taking my questions I have two.

Brian Nowak: Andy the first one is sort of on the cost to serve comments coming down for the first time since 2018.

Brian Nowak: As you sort of looking at 24, and 25 and you can just sort of walk us through some of the key operational blocking and tackling that has to happen to continue to drive down that cost of serve and back to 2018 levels or however, you're thinking about your north star from that perspective, and then the second one as well.

Brian Nowak: Philosophically about capital return it looks like the cash balance could start building pretty nicely here. How do you think about the idea of buyback share repurchases or some type of capital return program to sort of help shareholders out.

Dave Fildes: So that's $145 billion a year over And then, you know, if you look back. Revenue Growth Accelerated to 13.2% Q4, AMZL AMZN. Thank you. Thank you. Great. Hold.

Speaker Change: Thank you Brian I appreciate I'll take the first and I'll, let Brian take the second.

Brian Nowak: On the cost to serve coming down as I mentioned in my opening remarks.

Speaker Change: I think that we feel like were.

Brian Olsavsky: Generative AI, product. FedRock, On the CAPEX side, let me talk in total... We had 48 billion dollars. 23 was down $10 billion.

Brian Nowak: Where we're going to ultimately be I think we feel like we have meaningful upside there.

Brian Nowak: I think one thing that it's easy to make as large of changes we made in regionalization in the U S and saying check.

Brian Olsavsky: We've talked about it during the year quite a bit, tied to the infrastructure, that AMZN, reached a very high. AMZN, CAPEX will do it today, and it will still work. But we do expect CapEx, primarily the. Center, and Logistics Area, I would say it's more, although we are Transcription by CastingWords, AMZN AMZN AMZN. I'll add a few things to what Brian said. I think just as it relates to the first part of the question, the way to think about backlog conversion is just, these are deals that we've signed that are long-term deals, typically with customers.

Brian Nowak: We got that done but the reality is.

Brian Nowak: We still have several improvements.

Brian Nowak: Each of ways that we can hone the regionalization improvements that we made in 2023 in 2024 and so when when when the team speaks about the areas where they believe they have opportunities there's still opportunities just in regionalization as we continue to hold that.

Brian Nowak: Also think in many ways it was.

Brian Nowak: Very useful for us to go through what was a pretty significant change we went through during the pandemic, where we doubled the size or fulfillment center network in 18 months and built out a last mile Transportation network.

Dave Fildes: And then there's some amount of time it takes for us to work with those customers to migrate those workloads. And so, you know, some of the trends that we have seen. Over the last quarter, you know, first of all, I think that the lion's share of cost optimization has happened. It's not that there won't be any more or that we don't see any more, but it's just attenuated very significantly.

Size of UBS in 18 months.

Brian Nowak: Disruptive.

Brian Nowak: Get that optimized but one of the things that was very useful was it really caused us to re look at everything we're doing the fulfillment network and we've looked at it.

Dave Fildes: And at the same time, what we've seen is that migrations, and this speaks to some of the backlog, migrations that were, you know, proceeding, but maybe not at the pace that we saw before have started to pick up again. We've also seen that a number of the deals, which typically signed more quickly, but we're signing more slowly in more uncertain environments. You know, a lot of those got done in the last quarter, and you heard some of the examples in my opening remarks, but that was, you know, just some of several.

Brian Nowak: It began or XI and we have found so many areas that we believe that we can evolve that I think will both help our cost to serve.

Brian Nowak: Even more importantly, deliver faster delivery speeds for customers.

Brian Nowak: One area, which in particular, which you will see us focus on over the next year or two is just we think there are real opportunities in our inbound network and our inbound processes and then where we locate inventory in association with that which will accomplish both of those task.

Dave Fildes: AMZN, And then, you know, on the Gen-AI side... It's, you know, if you look at the Gen AI revenue we have, in absolute numbers, it's a pretty big number, but in the context of a $100 billion annual revenue run rate business. It's still relatively small, much smaller than what it will be in the future, where we really believe we're going to drive. The next question comes from the line of Brian Nowak.

Brian Nowak: For Us I don't believe that we believe that 2018 is the north star and cost to serve I think we believe we can keep evolving it and being better than that.

Speaker Change: Yes, I'd just add a couple of other items there we've gotten.

Brian Nowak: Great. Thanks for taking my questions. I have two.

Speaker Change: A lot better at fixed cost controls.

Speaker Change: As we scale and.

Andy Jassy: Andy, the first one is sort of on the cost to serve comments coming down for the first time since 2018. As you sort of look into 24 and 25, can you just sort of walk us through some of the key operational blocking and tackling that has to happen to continue to drive down that cost of serve back to 2018 levels, or whatever you're thinking about your North Star from that perspective? And then the second one is some sort of philosophy about capital returns.

Speaker Change: Youre seeing that as part of <unk>.

Speaker Change: <unk>.

Speaker Change: A lower cost per serve suddenly in operations essentially throughout the company.

Speaker Change: And what we're seeing is reduction in some of the inflationary factors that hit us in <unk>.

Speaker Change: Especially hard in 2021, and 2022 things like transportation or transportation services fuel and others. So not totally out of the woods, there, but coming down and we still see some more upside on your share repurchase question first.

Speaker Change: First of all just really excited to actually have that question.

Speaker Change: No one's asked me that in three years.

Speaker Change: I appreciate it.

Brian Olsavsky: You know, it looks like the cash balance could start building pretty nicely here. How do you think about the idea of, you know, buyback share repurchases or some type of capital return program to sort of help shareholders out? Yeah, thank you, Brian.

Speaker Change: Yeah.

Speaker Change: We have come through a tumultuous periods where.

Speaker Change: Andy just said, we doubled the size of R. R.

Speaker Change: <unk> footprint.

Speaker Change: <unk> invested heavily and you saw that negative free cash flow at least center.

<unk> calculation for the period 2021 and 2022 so.

Andy Jassy: I appreciate it. I'll take the first, and I'll let Brian take the second. You know, on the cost of serving coming down, as I mentioned in my opening remarks, I don't think that we feel like we're where we're going to ultimately be. You know, I think we feel like we have meaningful upside there. And, you know, I think one thing that it's easy to do to make as large a change as we made in regionalization in the U.S. and think, check. You know, we got that done. But the reality is different.

Speaker Change: Were glad to see the improvement in the bounce back in free cash flow a lot.

Speaker Change: And we do debate.

Speaker Change: And discuss capital structure policies.

Speaker Change: Annually, more often and I have nothing to announce today, but.

Speaker Change: Again, we primarily think we have a lot of.

Strong investments in front of us we're good.

Speaker Change: We're glad to have the liquidity.

Speaker Change: Better liquidity at the end of 2023 and trying to continue to build that.

Speaker Change: And our next question comes from the line of Doug Anmuth with J P. Morgan. Please proceed with your question.

Doug Anmuth: Thanks for taking the questions.

Andy Jassy: We still have several improvements and a bunch of ways that we can hone the regionalization improvements that we made in 2023 in 2024. And so when the team speaks about the areas where they believe they have opportunities, there's still opportunities just in regionalization as we continue to hone that. But I also think, you know, in many ways, it was very useful for us to go through what was a pretty significant change we went through during the pandemic where we doubled the size of our fulfillment center network in 18 months and built out a last mile transportation network the size of UPS in 18 months. It was disruptive to get that optimized, but one of the things that was very useful was it really caused us to relook at everything we were doing with fulfillment

Doug Anmuth: Ryan you've seen very good improvement in international profitability over the last several quarters can you just talk about some of the levers here that you're thinking about just as you look to move into positive operating income and then how international could potentially approach North America levels over time.

Ryan: And then just a follow up there are you seeing any shipping disruptions currently related to the Red Sea and does that factor into your outlook at all for <unk>. Thanks, Yeah.

Ryan: Yeah, Let me start with the second one first so.

Ryan: Mindful of.

Ryan: The geo political issues around the world, especially as you say in the supply chain and how that might impact shipments to the U S into Europe.

Ryan: Working very hard to.

Speaker Change: Yes, I think that not backed up on customers.

Brian Olsavsky: And we looked at it with really a beginner's eye, and we have found so many areas that we believe that we can evolve that I think will both help our costs to serve customers even more and deliver faster delivery speeds for customers. I mentioned, you know, one area which, in particular, which you'll see us focus on over the next year or two is just, we think there are real opportunities in our inbound network and our inbound processes, and then where we locate inventory in association with that, which will accomplish both of those tasks. But, you know, for us, I don't believe that we believe that in 2018. AMZN Yeah, I just had a couple other items there. You know, we've got a lot that are at fixed cost control. AMZN, It's not only... It's actually true, and we're, you know, we're seeing a reduction, especially hard. So, not totally out of the woods there, but coming down.

Speaker Change: We will continue to work that is not a material impact.

Speaker Change: Estimated in our guidance in Q1.

Speaker Change: But again as I said, we're vigilant on that.

Speaker Change: Work to take steps, where we need to to make sure. The customer experience is not impacted on the international segment operating income.

Speaker Change: We're very pleased with the results.

Speaker Change: Especially over the last few quarters.

Speaker Change: Improved operating income by $1 $8 billion year over year, and I would attribute it to the steady progress that Andy was saying about the U S. Again cost of service down advertising is stronger.

Speaker Change: A lot of attention to cost a lot of attention to investments and where we're going to invest in.

Other fixed cost controls so a lot of that is what we're seeing in the.

Speaker Change: Established countries of Europe, and Japan, I would divide this segment a bit into a couple of buckets first theres that international segment.

Speaker Change: European established country segment and Thats it behaves a lot like you would see in North America.

Speaker Change: If you look at the emerging countries and we've again, we've launched 10 countries in the last seven years, they're all on their own trajectory of.

Brian Olsavsky: Amor, on your share repurchase question, first of all, I'm just really excited to actually have that question. AMZN, I appreciate it. But

Speaker Change: Journey to profitability and significance with customers and we're pleased with that I think they are all growing nicely and again leveraging their cost structure investing wisely in prime benefits, but.

Brian Olsavsky: We have come through a tumultuous period where... AMZN, all to We're glad to see the bounce back in free cash, a lot of We do debate. Discuss Capital Structure Policy. AMZN AMZN, and AMZN AMZN. We primarily think we have a... AMZN. We're glad. AMZL, and our next question, dog. Thanks for taking the questions. Brian, you've seen very good improvement in international profitability over the last several quarters. Can you just talk about some of the levers here that you're thinking about just as you look to move into positive operating income, and then how international profitability could potentially approach North America levels over time? And then just a follow up there, are you seeing any shipping disruptions currently related to the Red Sea? And does that factor into your outlook at all for OneQ? Thanks. Yeah, let me start with the second one first. So, we are mindful of the geo... AMZN, how the, I'm just working very hard to... Make That Knot, back up on Customer Service. This is not a material impact.

Speaker Change: All of the curve to breakeven and then be a contributor to income and free cash flow.

Speaker Change: The other thing I'd point out is that we have.

Speaker Change: Absolutely I would say prime benefits.

Speaker Change: Our international markets.

Speaker Change: We think it's a very good source of customer acquisition and customer retention.

Speaker Change: The investment in those areas can fluctuate quarter to quarter, we had a bit of a higher spend in excuse me in digital content in Q4, as we had a number of.

Marketing and content, especially around live sports English Premier League of Champions League in Germany, and Italy for example, but we like those benefits.

Speaker Change: Those investments different proven vehicle for customer acquisition as I said.

Speaker Change: It gets people shopping at our sites and engaging with benefits is always positive for the relationship with Amazon.

Speaker Change: And the next question comes from the line of Mark Mahaney with Evercore ISI. Please proceed with your question. Okay. Thanks two questions. Please thank.

Mark Mahaney: Thank you mentioned, Brian that the North American margins have improved for seven quarters in a row or something like that a significant number I would assume that most of the factors like rising capacity utilization given your capex commentary about retail.

Brian Olsavsky: AMZN, where we. On the international segment... Yeah, we're very pleased with the results, especially over the last few quarters. AMZN, I would attribute it to the steady progress that Andy was saying about the U.S. Cost of Service advertised, A lot of attention to cost, a lot of attention to cost, and others. A lot of that is what we're seeing in the established Europe.

Mark Mahaney: The regional center efficiencies and then overall.

Mark Mahaney: Yes.

Mark Mahaney: Moderation in shipping and logistics costs labor costs I mean, all of these factors probably mean that we will continue to get an improvement in north American margins, but if you would comment on that and then secondly on the.

Brian Olsavsky: I would divide this segment a bit into... First, there's that international..., www.amzn.com; If you look at the emerging..., last, they're all on their own trajectory of..., journey to profit. I'm pleased with that. I think they're all great.

Primetime video.

Mark Mahaney: On Prime video I know it just launched but could you provide any.

Mark Mahaney: Any color or context on expectations around that you've got a massive number of prime.

Brian Olsavsky: Leveraging Their Costs. InvestingWise. AMZN, All on a curve, break. Thank you.

Mark Mahaney: Users are coming in with a reasonable.

Brian Olsavsky: The other thing I'd point out is... and we have. AMZN AMZN AMZN, Customer Acquisition. Investment in those areas can fluctuate quarter to quarter. We had a bit of a higher spend.

Mark Mahaney: CPM with the law.

Mark Mahaney: AD load but.

Speaker Change: It seems like there should be a substantial opportunity for you. So if you want to try to size that for us or how you think about the upside that'd be really appreciate it. Thank you.

Brian Olsavsky: Digital Content in Q4. AMZN AMZN, Marketing and Content, especially around lives. Premier League and Champions League.

Speaker Change: Sure Mark Thank you.

Speaker Change: I think Andy laid.

Speaker Change: Laid it out pretty well a few minutes ago on the cost structure the regionalization the.

Brian Olsavsky: But we like those benefits. AMZN, Vehicle for Customer Acquisition. Shopping at our sites and engaging, And the next question comes from the line of Mark... for ISI. Okay, thanks. Two questions, please.

Speaker Change: Growing into the assets that we added during the pandemic.

Speaker Change: Great efficiency.

Speaker Change: Work with productivity across really all of our operations network fixed attention to fixed costs and lowering costs, where we can maintaining costs, where we can.

The increase in advertising success.

Speaker Change: Success in advertising revenue growth outpace.

Speaker Change: Outpaced our.

Speaker Change: Traffic growth rates. So all of those trends, we expect to continue and we're going to work hard to make sure. They continue and as we said.

Mark Mahaney: I think you mentioned, Brian, that North American margins have been improved for seven quarters in a row or something like that, a significant number. I would assume that most of the factors like rising capacity utilization, given your CapEx commentary about retail, the regional center efficiencies, and then overall, you know, Moderation in shipping and logistics costs, and labor costs... I mean, all these factors probably mean that we'll continue to get an improvement in North American margins, but could you comment on that? And then, secondly, on prime time video, Amazon Prime video. I know it just launched, but could you provide any color context on expectations around that? You've got a massive number of Prime users. You're coming in with a reasonable CPM and a low ad load, but it seems like there should be a substantial opportunity for you, so if you want to try to size that for us, or how you think about the upside, that would be really appreciated. Sure Mark, thank you.

Speaker Change: We have a.

Speaker Change: One guideposts as maybe pre pandemic profitability.

Speaker Change: But yes, we are.

Speaker Change: We're working to.

Speaker Change: We're not putting a limit on our improvement we're going to continue to look for ways to lower the cost to serve.

Speaker Change: And I might add at the same time increases.

Speaker Change: The customer experience because we hit that we had that cost improvement at the same time when we.

First got back to our shipping speeds from pre pandemic and then exceeded them. So we're happy with that and we will continue to do so.

The customer experience and also too.

Speaker Change: Lower our costs and leverage our cost structure.

Speaker Change:

Speaker Change: Yeah on your second question on ads I can't scale it right now.

Speaker Change: What I would say for for ads in video is that.

Speaker Change: Advertisers excited to to access our prime customer base.

Speaker Change: We're looking for ways to.

Speaker Change: Increase our.

Speaker Change: Advertising and our streaming properties, including fire TV, but also.

Speaker Change: Prime video, but also it seems like a freebie and Twitch and yes, it's an important part of the total business model and we.

Speaker Change: I expect it will allow us to have a healthy business to continue to invest in content.

Brian Olsavsky: You know, I think Andy laid it out pretty well a few minutes ago on the cost structure. AMZN, growing into the assets that we added. Great efficiency, AMZN Transcribed by https://otter.ai, AMZN traffic growth rates. So all of those trends we expect to continue, and we're going to work hard to make sure that AMZN is a pandemic. But, you know, we are.

Speaker Change: And to continue to grow that and we feel good about it and we.

And the way we anticipate.

Speaker Change: Yes, it's progressing.

Speaker Change: We will not have heavy AD loads realm.

Speaker Change: Relative to any other.

Speaker Change: Network television and other things.

Speaker Change: It's like all of our advertising, we're trying to get useful for customers.

Speaker Change: And our next question comes from the line of Scott Devitt with Wedbush Securities. Please proceed with your question.

Scott William Devitt: I had one on grocery and one on healthcare first on grocery I was wondering if you could talk a bit about.

Scott William Devitt: The progress that youre, making unifying the offering between dot com crash and whole foods.

Brian Olsavsky: We're not putting a limit on... AMZN, and my dad at the same time. We had that cost improvement at the same time. AMZN, AMZN, AMZN, Yeah, your second question about ads. I can't scale it right now.

Scott William Devitt: And as it relates to reverse logistics and using a grocery facilities, how that's lowering the cost of a worsening.

Scott Devitt: Weather.

Scott Devitt: A significant opportunity there in terms of driving traffic and revenue in the grocery business then.

Brian Olsavsky: I mean, you know. That's what I would say for ads. AMZN, Advertisers are excited to access our AMZN, Advertising, you know fire, So. AMZN, Auto.

Scott Devitt: And then secondly on health care.

Scott Devitt: Poor.

<unk> poor customer experience industry you've made.

Scott Devitt: These significant efforts now with an acquisition offering primary care just be curious if you could talk a little bit more about the longer term vision and helpful. Thank you.

Brian Olsavsky: AMZN AMZN, AMZN as it progressed. AMZN, It's like all of our... Send in our next question. Scott Devitt, Thanks.

Scott Devitt: Yes and grocery.

Scott Devitt: We're pleased with the progress we're making there we think about our grocery business right now and kind of I'll call. It three big macro segments first of non perishables, where.

Scott William Devitt: I have one on groceries and one on health care. First on grocery, I was wondering if you could talk a bit about the progress that you're making in unifying the offering between dot-com, fresh, and whole foods, and as it relates to reverse logistics and using the grocery facilities, how that's lowering the cost of reverse logistics, and whether you're getting a significant opportunity there in terms of driving traffic and revenue in the grocery business. And secondly, on health care in such a notoriously poor customer experience industry. And, you know, you've made significant efforts now in acquisition and offering primary care. I would just be curious if you could talk a little bit more about the longer term vision for healthcare. Thank you.

Scott Devitt: These are things like consumables, and canned goods and pet food.

Scott Devitt: Awesome beauty products and pharmaceutical one.

Scott Devitt: It's a big business and it's continuing to grow at a very healthy clip and we're really pleased with that business.

Scott Devitt: And it's really the way the most mass merchandisers.

Scott Devitt: Mass merchandisers got into the grocery business a few decades ago. So that continues to grow at a very healthy clip.

Scott Devitt: We have a physical presence.

Scott Devitt: Long with online, but in whole foods market, which is really the pioneer and a leader in organic.

Scott Devitt: Grocery and.

Andy Jassy: Yeah, on grocery, you know, we're, we're, pleased with the progress we're making there. We always think about our grocery business right now and, kind of, I'll call it, three big macro segments. You know, the first is non-perishables, which are things like consumables and canned goods and pet foods, Health and Beauty Products, and Pharmaceuticals.

Scott Devitt: That's continuing to grow at a very good clip. We also made a number of changes in the business last year on the profitability side, we really like the profitability trajectory. We see there. So again, you'll see that keep growing and expanding and feel very good about that as well.

Scott Devitt: You want it serve as many grocery needs as we do you have to have.

Andy Jassy: We, it's a big business, and it's continuing to grow at a very healthy clip, and we're really pleased with that business. And it's really the way that most mass merchandisers got into the grocery business a few decades ago. So that continues to grow at a very healthy pace. We have a physical presence, you know, along with online, but in Whole Foods Market, which is really the pioneer and the leader in organic groceries, and that's continuing to grow at a very good clip. We also made a number of changes in the business last year on the profitability side, where we really like the profitability trajectory we see there. And so, again, you'll see that keep growing and expanding and feel very good about that as well. If you want to serve as many groceries,

Scott Devitt: Mass physical presence and that's what we've been trying to do with with fresh over several years.

Scott Devitt: We have tested we've been testing <unk>.

Scott Devitt: Two of our fresh format in a few locations near Chicago in a few locations in southern California.

Scott Devitt: Very early its just a few months in but the results far are very promising and.

Scott Devitt: On almost every dimension and so yeah, we need to see it for a little bit longer time, but the results appear like we have something that's resonating and if we continue to see that and the issue becomes.

Scott Devitt: How fast and what's the best way to expand we have also been spending increasing amounts of time and efforts here trying to make it easier for customers to be able to shop between.

Scott Devitt: On the non perishables and then our.

Andy Jassy: AMZN, We have tested, we've been testing a V2 of our fresh format in a few locations near Chicago. AMZN Amazon, How fast and what's the best way to... We have also been spending increasing amounts of time and effort here trying to make it easier for customers to be able to shop. You know, the non-perishables and then our selection of whole foods as well as fresh.

Scott Devitt: Selection whole foods as well as fresh I think you can expect to see that over time both.

Scott Devitt: And the user experience on the App and the website as well as how we're able to better leverage between the different.

Scott Devitt: Business segments and their logistics capabilities.

Scott Devitt: Being able to get better leverage there better economics, and then allowing people to order and one concern place would be able to pick up in multiple places pick up from multiple.

Andy Jassy: I think you can expect to see that over time. The user experience, you know, in the app and on the website, as well as how we're able to better leverage the different business segments and their logistics capability, www.amzn.com in the healthcare space. You know, I, uh...

Scott Devitt: Types of grocery products in one place Youre seeing us already do more of that and I think you can expect that in the future.

Scott Devitt: In the health care space.

Scott Devitt: Yeah.

Andy Jassy: If you think about what we do on the retail side, adding a pharmacy capability is a pretty natural extension. It's something that customers have asked us for for many years. And it's got more complexity to it than the rest of our retail business, so we need to think carefully about whether we want to pursue it.

Scott Devitt: If you think about what we do on the retail side.

Scott Devitt: Adding a pharmacy capabilities, a pretty natural extension, it's something that customers have asked us for for for many years and it's got more complexity to it than the rest of our retail business. So we just think carefully about whether we wanted to pursue it but the customer so badly wanted it and.

Andy Jassy: But the customers so badly wanted it. And the experience could be better, we thought. And we could be a meaningful part of changing that if we pursue it. I really like the momentum that we're seeing in our Amazon Pharmacy business. It's growing really quickly, but even more important than how fast it's growing is how it's growing. If you've used it, and you've paid attention to the customer experience over the last 12 to 15 months, it's just... AMZN. People really love it. And I think that when You know, the health care experience, particularly in the U.S., is a pretty frustrating one and not a very good one, and I think that when we tell our grandkids that the way you used to have to go get primary care was to make an appointment three weeks in advance, drive 20 minutes to the doctor, park, wait in the reception for 15 minutes, get put into an exam room for 15 minutes, the doctor comes in, talks to you for People are just not; our grandkids will not believe that was the experience.

Scott Devitt: And the experience, we thought could be better and we could be a meaningful part of changing that we pursued it and I really like the momentum that we're seeing in our Amazon pharmacy business, it's growing really quickly, but even more important than how fastest growing.

Scott Devitt: If you've used it and you've paid attention to the customer experience over the last 12 to 15 months. Its just substantially improved from where it already was pretty good.

Scott Devitt: People really love the experience and I think that win.

Scott Devitt: The health care experience, particularly in the U S.

Scott Devitt: Is a pretty frustrating one and not a very good one and I think that when we tell our grandkids. It. The way you used to have to go get primary care was to make an appointment three weeks in advance and then drive 20 minutes to the Doctor Park weight and the reception for 15 minutes get put into an exam room for 15 minutes.

Scott Devitt: Doctor comes in and talk to you talk SKU for five to 10 minutes and then you got to drive 20 minutes that pharmacy people are just not our grandkids will not believe that was the experience.

Andy Jassy: And it's not going to be, and you already see that changing, and it's part of what attracted us in such a significant way to One Medical is just that their application, their app, is so easy to use. You have all your healthcare data in one spot. You can do chats with medical practitioners, video calls, and if you need to see someone, there are physical locations in lots of metropolitan cities where you can get in the same day. If you need to see a specialist, they're plugged into specialists in all the cities in which we operate, where you can get in a day or two later. It's just, it's a very different experience if you actually need medication.

Scott Devitt: And it's not going to be and you already see that changing and it's part of what attracted us in such a significant way to one medical is just.

Scott Devitt: There their application their app as is so easy to use you have all your health care data in one spot you can do chats with medical practitioners you can do video calls if you need to see someone.

Scott Devitt: Physical locations and lots of Metropolitan cities, where you can get into the same day, if you need to see a specialist they're plugged into specialists in all the cities in which we operate where you can get in a day or two later like it's just it's a very different experience than if you'd actually need medication.

Andy Jassy: You can get that sent to you in a day or two, either through Amazon Pharmacy or other pharmacies that we work with. And that experience is so much better than what we've been accustomed to seeing. And so I think it's, you know, again, still early days. We're excited. We launched for Prime members the ability to get one medical subscription for $9 a month or $99 a year, which is 50% off the typical price.

Scott Devitt: You can get that to you in a day or two either through Amazon pharmacy or other pharmacies, we work with and that experience is so much better than what we've been accustomed to seeing and so I think it's again still early days. We're excited we launched for prime members the ability to get one medical.

Scott Devitt: Scripture for $9, a month or $99, a year, which is 50% off the typical price and that's a very good uptake.

Andy Jassy: And that saw was very good. Thank you all for joining our session Wong Kong 30. And if we are helpful in changing what that primary care experience is and what it looks like to get pharmaceutical products, there's a lot of other things that we might be able to help customers with over time. Whether it's wellness or whether it's diet, there's a bunch of areas that I think we can help. And our final question, on the line from Colin Sebastian. Thanks very much.

Scott Devitt: Cup.

Scott Devitt: So it's still early days, but we think we have an opportunity to be a meaningful part of changing that experience.

Scott Devitt: And if we are helpful.

And changing what that primary.

Scott Devitt: It's primary care experiences.

Scott Devitt: It looks like get pharmaceutical items, there's a lot of things that we might be able to help customers with customers with over time.

Scott Devitt: Whether it's wellness or whether it's got it there's a bunch of areas I think we can help over time.

Scott Devitt: And our final question will come from the line of Colin Sebastian with Baird. Please proceed with your question.

Colin Sebastian: Thanks very much.

Colin Sebastian: I just wanted to follow up on AWS for a moment. You outlined the generative AI stack. I'm just curious how you're going to market within the application layer given the competitive dynamic. Thanks.

Colin Sebastian: I just wanted to follow up on AWS for a moment you outlined degenerative AI stock, which I think is which is very clear.

Colin Sebastian: So I'm just curious maybe how you are going to market within the application layer given sort of the competitive dynamics of that and then.

Andy Jassy: AMZN.com, Retail apps, or what's your vision there? Thank you. Yeah, so Colin, I would say a few things first about generative AI. Yeah, you know, it's when we talk to customers, particularly enterprises, as they're thinking about generative AI, many are still thinking through at which layers of those three layers of the stack I laid out that they want to operate at. And, you know, we predict that most companies will operate in at least two of them, but I also think, even though it may not be the case early on, I think many of the technically capable companies will operate in all three.

Colin Sebastian: Maybe expand if he could Andy a little bit on the strategy for <unk> on the consumer facing side of the business. I know you launched roof is today is that an area that you think could materially improve conversion rates and the overall consumer engagement on on the retail apps or what's your what's your vision there. Thank you.

Andy Jaffe: Yeah, So Collin I would say a few things on first time generative AI.

Andy Jaffe: When we talk to customers, particularly at enterprises as they are thinking about generative AI.

Andy Jaffe: Many are still thinking through and which layers of those three layers of the stack I laid out that they want to operate in and.

Andy Jaffe: And we predict that most companies will operate in at least two of them, but I also think even though it may not be the case early on I think many of the technically capable companies will operated all three they will build their own models. They will leverage existing models from us and then theyre going to build apps and I know one of the other interest.

Andy Jassy: They will build their own models. They will leverage existing models from us, and then they're going to build them. And I know one of the other interesting things that we see early on right now in generative AI is that it's a very iterative process and real work to go from plugging a question into a chat bot and getting an answer to turning that into a production-quality application at the quality you need for your customer experience and your reputation, and then also getting that application to work at the latency and cost characteristics that you need. So what we see is that They don't want just one model to rule the world.

Andy Jaffe: Things that we see early on right now in general is that.

Andy Jaffe: It is.

Andy Jaffe: It's a very iterative process and real work to go from.

Andy Jaffe: Plugging a question into a chat bot and getting an answer to turning that into a production quality application at the quality you need for your customer experience your reputation.

Andy Jaffe: And then also getting that application of work at the wait and see.

Andy Jaffe: Cost characteristics that you need.

Andy Jaffe: And so what we see is that customers want choice. They don't want just one mile to rule the world. They want different models for different applications and they want to experiment with all different sized models, because the yield different cost structures and different.

Andy Jassy: They want different models for different applications, and they want to experiment with all different sized models because they yield different cost structures and different latency characteristics. And so Bedrock is really responding with customers. They just, they know they want to change all these variables and try and experiment. And they have something that manages all those different transitions and changes so they can figure out what works best for them, especially in the first couple of years where they're learning how to build successful generative AI applications. It's incredibly important to them, so it's part of why we see Bedrock responding so much.

Andy Jaffe: Latency characteristics and so.

Andy Jaffe: Bedrock is really resonating with customers. They just they know they want to change all of these variables and try and experiment and they have some.

Andy Jaffe: That manages all those different transitions and changes so they can be they can figure out what works best for them, especially in the first couple of years, where they're learning how to build successful generative AI applications is incredibly important to them. So it's part of why we see bedrock resonates so much in <unk>.

Andy Jassy: In the same way, what's attractive to enterprises when they think about coding companions like Q is just how if you can get 30, 40% better productivity. For your developers, which in many cases for companies is their most scarce resource. It's a game changer, and they won't roll out every bit of code that comes from it, But if it can assist them to get 80% plus of the way there quickly, that's a big deal. And one of the things that's unique about Q is it's not just a coding companion. Yes, you know, it's an expert on AWS. It will help you, you know, it helps you write the code, but it also helps you debug the code and helps you test the code and helps you do transformations, and it helps you figure out how to multi-step implement features. There's a lot of, you know, it helps you troubleshoot. If there's something in your application that's awry, Q can find it and help you fix it.

Andy Jaffe: Wei.

Andy Jaffe: What's attractive to.

Andy Jaffe: Enterprises, when they think about coding companions like Q is just if you can get 30%, 40% better productivity for your developers, which in many cases for companies as their most scarce resource. It's a game changer, and you know and they don't they won't rollout.

Andy Jaffe: Every bit of code that comes from a coding companion, but if it can.

Andy Jaffe: Just then to get 80% plus the way they are quickly that's a big deal and one of the things. That's unique about Q is it's not just coding companion. It yes, it's an expert on AWS. It will help you.

Andy Jaffe: It helps you write the code, but it also helps you plug the code and helps you test code helps you do transformations and helps you figure out how to multi step implement features so there's a lot of help to troubleshoot or theres something in your application. It's ray Q confined it help you fix it and so you know and then it also got you look at all your data or pause.

Andy Jassy: And so, you know, and then it also lets you look at all your data repositories, whether it's intranets or wikis or, you know, the 40 plus data connectors like Salesforce and Atlassian and Zendesk and Slack. And it lets you have an intelligent conversation to get answers and take action. So it's a pretty differentiated capability there.

Andy Jaffe: The Tories, whether its internets or wikis or.

Andy Jaffe: The 40, plus data connectors, like Salesforce, and Atlassian and Zen desk flag.

Andy Jaffe: And what do you have an intelligent conversation to get answers and take actions. So it's a pretty differentiated capability there and win win enterprises are looking at how they might best make their developers more productive they're looking at what's the array of capabilities in these different coding companion options. They have and so we're spending a lot.

Andy Jassy: And when enterprises are looking at how they might best make their developers more productive, they're looking at what the array of capabilities in these different coding companion options they have. And so we're spending a lot of time, you know; our enterprises are quite excited about it. It created a meaningful stir at reInvent. And what you typically see is that these companies experiment with different options they have, and they make decisions for their employee base. And we're seeing very good momentum. The question about how we're thinking about Gen A.I.

Andy Jaffe: At a time our enterprises are quite excited about it it created a meaningful stare at re invent.

And what you see typically is that these companies experiment with different options they have and they make decisions for their employee base and we're seeing very good momentum there.

Andy Jaffe: A question about how we're thinking about gen AI in our consumer businesses.

Andy Jassy: in our consumer business... We're building dozens of generative AI applications across the company. Every business that we have has multiple generative AI applications that they're building, and they're all in different stages, many of which have launched, and others of which are in development.

Andy Jaffe: We're building dozens of generative AI applications across the company.

Andy Jaffe: Every business that we have has multiple generative AI applications that they're building and they are all different stages and many of which have launched others of which are in development. So if you just look in our some of our consumer businesses.

Andy Jassy: So if you just look at some of our consumer businesses on the retail side. We, you know, we built a generative AI application that allowed customers to look at a summary of customer reviews so that they didn't have to read hundreds and sometimes thousands of reviews to get a sense for what people like or dislike about a product. We launched a generative AI application that allows customers to quickly be able to predict what kind of fit they'd have for different apparel items. We've also built a generative application in our fulfillment centers that forecasts how much inventory we need in each particular fulfillment center. And so the start of the rollout of RUFUS today is really just another step, but we think one that's pretty meaningful in being a generative AI-powered shopping assistant.

Andy Jaffe: The retail side.

Andy Jaffe: We built a degenerative AI application that allows customers to look at.

Summary of customer reviews, so that they didn't have to read hundreds and sometimes thousands of reviews to get a sense for what people like or dislike about a product. We launched generative AI application that allows customers to quickly be able to predict what kind of fit they'd have for different apparel items.

Andy Jaffe: We built a generative app application that in our film at centers that forecast how much inventory, we need in each particular fulfillment center and so the.

Andy Jaffe: <unk>.

Andy Jaffe: Start of the rollout of roof is today is really just another step, but we think one that's pretty meaningful.

Andy Jaffe: And being a generative AI powered shopping assistant.

Andy Jassy: And, you know, it's trained on our very expansive product catalog, as well as our community Q&As and customer reviews and the broader web. But it lets customers discover items in a very different way than they have been able to on e-commerce websites. So if you want buying advice, like, what should I look for in a pair of headphones? Or if you are doing purpose shopping, like, what should I buy for cold weather golf or comparisons? You know, what's the difference between lip gloss and lip oil?

Andy Jaffe: And trained on a very expansive product catalog as well as our community Q&A and customer reviews.

Andy Jaffe: The broader web but lets customers.

Andy Jaffe: Discover items in a very different way than they have been able to an E. Commerce website. So if you want buying advice like what what should I look for in a pair of headphones or if you are doing purpose buying like what should I buy for cold weather golfer comparisons what's different swing lip gloss are lip oil.

Andy Jaffe: Or do you want a recommendation to the best Valentine's day gifts or.

Andy Jaffe: You're on a detailed page with rich product info, where you don't want to go through the whole page do you want to ask is this pickle ball racket. Good for beginners all those questions you can plug in and get really good answers.

Andy Jassy: Or do you want recommendations on the best Valentine's Day gifts? Or, you know, you're on a detail page with rich product info where you don't want to go through the whole page. Would you like to ask, is this pickleball racket good for beginners?

Andy Jaffe: Then it seamlessly integrated in the Amazon experience that customers are used to love to be able to take action. So I think that that's just the next iteration I think it's going to meaningfully change with discovery looks like for our shopping experience for our customers.

Andy Jassy: All those questions you can plug in and get really good answers. And then, AMZN, and jetproject.com have a significant number of generative AI applications that they either have built and delivered, or they're in the process of building. And I don't see that changing for many years.

Andy Jaffe: I could kind of step through every one of those consumer businesses.

Andy Jaffe: Advertising businesses is building capabilities, where people can.

Andy Jaffe: Submit a picture and a copy is written in the other way around and you kind of think about Alexa, where we're building a very large expanses large language model is going to make electricity, even more productive and helpful for customers every one of our consumer businesses.

Andy Jaffe: A significant number of generative AI applications that they either have built and deliver or they are in the process of building and I don't see that.

Operator: We have a lot of ideas. Thanks for joining us today on the call. 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 we look forward to talking with you again next quarter. Thanks for watching!

Andy Jaffe: I don't see that changing for for many years, we have a lot of ideas.

Speaker Change: Thanks for joining us today on the call and for your questions. A replay will be available late available on our Investor Relations website for at least three months. We appreciate your interest in Amazon and we look forward to talking with you again next quarter.

Speaker Change: And ladies and gentlemen that does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.

Speaker Change: Okay.

Speaker Change: Yes.

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Speaker Change: Okay.

Speaker Change: Okay.

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Speaker Change: Mhm.

Speaker Change: Yeah.

Uh huh.

Speaker Change: Mhm.

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