Q2 2024 Amazon.com Inc Earnings Call

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Operator: Thank you for standing by.

Operator: Thank you for standing by. Good day, everyone, and welcome to the Amazon.com second quarter 2024 financial results conference. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question and answer session. Today's call is being recorded, and for opening remarks, I will be turning the call over to the Vice President of Investor Relations, Dave Fildes. Thank you, sir. Please go ahead.

Operator: Good day, everyone, and welcome to the Amazon.com Second Quarter, 2024 financial results conference. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question-and-answer session.

Speaker Change: Thank you for standing by. Good day everyone and welcome to the amazon.com second quarter 2024 financial results conference.

Speaker Change: At this time all participants are in a listen-only mode. After the presentation, we will conduct a question and answer session.

Operator: Today's call is being recorded, and for opening remarks, I will be turning the call over to the Vice President of Investor Relations, Dave Fildes.

Speaker Change: Today's call is being recorded, and for opening remarks, I will be turning the call over to the Vice President of Investor Relations, Dave Fildes. Thank you, sir. Please go ahead.

Operator: Thank you, sir. Please go ahead.

Dave Fildes: Hello, and welcome to our Q2 2024 financial results conference call. Joining us today to answer your questions is Andy Jassy, our CEO, and Brian Olsavsky, our CFO.

Dave Fildes: Hello, and welcome to our Q2 2024 financial results conference call. Joining us today to answer your questions is Andy Jassy, our CEO, and Ryan Ososki, 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, less otherwise stated, all comparisons in this call will be against our results for the comparable period of 2023. Our comments and responses to your questions reflect management views as of today, August 1st, 2024 only, and will include forward-looking statements.

Speaker Change: Hello, and welcome to our Q2 2024 financial results conference call.

Dave Fildes: As you listen to today's conference call, we encourage you to have our press release in front of you, which includes our financial results, as well as metrics and commentary on the quarter. Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2023. Our comments and responses to your questions reflect management's views as of today, August 1, 2024 only, and will include forward-looking statements. However, actual results may differ materially.

Dave Fildes: Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and our filings with the SEC, including our most recent annual report on form 10K and subsequent filings. During this call, we may discuss certain non-GAAP financial measures. In our press release, slides accompanying us webcasts, 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 today and what we believe today to be appropriate assumptions.

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.

Speaker Change: 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 Fildes: Our guidance incorporates the order trends that we've seen today 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.

Dave Fildes: Our results are inherently unpredictable and may be materially affected by many factors, including fluctuations in foreign exchange rates, changes in global economic and geopolitical conditions, and customer demand and spending, including the impact of recessionary fears. Inflation, interest rates, regional labor market constraints, world events, the rate of growth of the Internet, online commerce, cloud services, and new and emerging technologies, and the various factors detailed in our filings with the SEC. Our guidance assumes, among other things, that we don't conclude any additional business acquisition, as restructuring or legal settlements. It's not possible to accurately predict demand for our goods and services, and therefore our actual results could differ materially from our guidance.

Speaker Change: 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.

Dave Fildes: Our guidance assumes, among other things, that we don't conclude any additional business acquisitions, restructurings, or legal settlements. However, it's not possible to accurately predict demand for our goods and services, and therefore, our actual results could differ materially from our guidance.

Andy: Our guidance assumes, among other things, that we don't conclude any additional business acquisitions, restructurings, or legal settlements. It's not possible to accurately predict demand for our goods and services, and therefore our actual results could differ materially from our guidance. And now, I'll turn the call over to Andy.

Andy Jassy: And now, I'll turn the call over to Andy. Thanks, Dave. Today, we're reporting $148 billion in revenue, up 11% year-over-year, excluding the impact from foreign exchange rates. Operating income was $14.7 billion, up 91% year-over-year, and trailing 12-month free cash flow adjusted for equipment finance leases was $51.4 billion, up 664% or $44.7 billion year-over-year. As I think about what matters to customers long-term and therefore to Amazon, there's a lot to like about what we're seeing. Starting with AWS, year-over-year revenue growth accelerated again from 17.2% in Q1 to 18.8% in Q2. We're continuing to see three macro trends drive AWS growth.

Dave Fildes: And now I'll turn the call over to Andy. Thanks, Dave. Today, we're reporting a hundred.

Andy Jassy: Thanks Dave. Today we're reporting $148 billion in revenue, up 11% year-over-year excluding the impact of foreign exchange rates. Operating income was $14.7 billion, up 91% year-over-year, and trailing 12-month free cash flow adjusted for equipment finance leases was $51.4 billion, up 664%, or $44.7 billion year-over-year. As I think about what matters to customers long term, and therefore to Amazon, there's a lot to like about what we're seeing. Starting with AWS, year-over-year revenue growth accelerated again from 17.2% in Q1 to 18.8% in Q2. We're continuing to see three macro trends drive AWS growth. First, companies have completed the significant majority of their cost optimization efforts and are focused again on new efforts.

Andy: Thanks Dave, today we are reporting $148 billion in revenue, up 11% year over year excluding the impact from foreign exchange rates.

Andy: Starting with AWS, year-over-year revenue growth accelerated again from 17.2% in Q1 to 18.8% in Q2.

Andy Jassy: First, companies have completed the significant majority of their cost optimization efforts and are focused again on new efforts. Fords, second, companies are spending their energy again on modernizing their infrastructure and moving from on-premises infrastructure to the cloud. This modernization enables builders to save money, in security and operational performance and a deepest partner ecosystem. AWS continues to be customers' partner of choice and the biggest beneficiary of this flip from on-premises to the cloud. And third, builders and companies of all sizes are excited about leveraging AI. Our AI business continues to grow dramatically with a multi-billion dollar revenue run rate, despite it being such early days, but we can see in our results and conversations with customers that our unique approach and offerings are resonating with customers.

Andy Jassy: Second, companies are spending their energy again on modernizing their infrastructure and moving from on-premises infrastructure to the cloud. This modernization enables builders to save money, innovate at a more rapid clip, and drive productivity in most companies' scarcest resources, developers. This is the flip I've talked about in the past, where the vast majority of global IT spend today is on-premises, and we expect that to keep inverting over time.

Andy: Second, companies are spending their energy again on modernizing their infrastructure and moving from on-premises infrastructure to the cloud.

Andy: This modernization enabled builders to save money, innovate at a more rapid clip, and drive productivity in most companies' scarcest resources, developers.

Andy Jassy: With the broadest functionality, the strongest security and operational performance, and the deepest partner ecosystem, AWS continues to be customers' partner of choice and the biggest beneficiary of this flip from on-premises to the cloud. And third, builders and companies of all sizes are excited about leveraging AI. Our AI business continues to grow dramatically with a multi-billion dollar revenue run rate despite it being such early days, but we can see in our results and conversations with customers that our unique approach and offerings are resonating with customers.

Andy: And we expect that to keep inverting over time.

Andy: And third, builders and companies of all sizes are excited about leveraging AI. Our AI business continues to grow dramatically with a multi-billion dollar revenue run rate despite it being such early days, but we can see in our results and conversations with customers that our unique approach and offerings are resonating with customers.

Andy Jassy: At the heart of this strategy is a firmly held belief, which we've had since the beginning of AWS, that there is not one tool to rule the world. People don't want just one database option or one analytics choice or one container type. Developers and companies not only reject it, but are suspicious of it. They want multiple options for flexibility and to use the best tool for each job to be done. The same is true in AI. You saw this several years ago when some companies tried to argue the TensorFlow would be the only machine learning framework that mattered and then pie towards another's overtook it.

Andy Jassy: At the heart of this strategy is a firmly held belief, which we've had since the beginning of AWS, that there is not one tool to rule the world. People don't want just one database option or one analytics choice or one container type. However, developers and companies not only reject it but are suspicious of it.

Andy Jassy: They want multiple options for flexibility and to use the best tool for each job to be done. The same is true in AI. You saw this several years ago when some companies tried to argue that TensorFlow would be the only machine learning framework that mattered, and then PyTorch and others overtook it. The same one-model or one-chip approach dominated the earliest moments of the generative AI boom.

Andy: Developers and companies not only reject it,

Andy Jassy: The same one model or one chip approach dominated the earliest moments of the gender to the AI boom, but we have a lot of data to suggest is not what customers want here either. And our AWS team is determined to deliver choice and options for customers. You can see this philosophy and the primitive building blocks were building it all three layers of the gen AI stack. At the bottom layer, which is for those building gender of AI models themselves. The cost of compute for trading and inference is critical, especially as models get to scale. We have a deep partnership with Nvidia and the broader selection of Nvidia instances available, but we've heard loud and clear from customers that they relish better price performance.

Andy Jassy: But we have a lot of data that suggests this is not what customers want here either, and our AWS team is determined to deliver choice and options for customers. You can see this philosophy in the primitive building blocks we're building at all three layers of the Gen AI stack. At the bottom layer, which is for those building generative AI models themselves, the cost to compute for training and inference is critical, especially as models get to scale.

Andy Jassy: We have a deep partnership with NVIDIA and the broadest selection of NVIDIA instances available, but we've heard loud and clear from customers that they relish better price performance. It's why we've invested in our own custom silicon in Trainium for training and Inferentia for inference. And the second versions of those chips, with Trainium coming later this year, are very compelling on price performance. We're seeing significant demand for these chips. These model builders also desire services that make it much easier to manage the data, construct the models, experiment, deploy to production, and achieve high-quality performance, all while saving considerable time and money. That's what Amazon SageMaker does so well, including its recently launched feature called HyperPods that changes the game and networking performance for large models, and we're increasingly seeing model builders standardize on it.

Speaker Change: The cost to compute for training and inference is critical.

Speaker Change: We have a deep partnership with NVIDIA and the broadest selection of NVIDIA instances available, but we've heard loud and clear from customers that they relish better price performance.

Andy Jassy: It's why we've invested in our own custom silicon in training for training and inferential for inference, and the second versions of those chips with training coming later this year are very compelling and price performance. We're seeing significant demand for these chips. These model builders also desire services to make it much easier to manage the data, construct the models, experiment, deploy the production, and achieve high quality performance, all while saving considerable time and money. That's what Amazon SageMaker does so well, including its most recently launched feature called Hyperpods that changes the game and networking performance for large models.

Andy: It's why we've invested in our own custom silicon in Trainium for training and Inferentia for inference. And the second versions of those chips, with Trainium coming later this year, are very compelling in price performance. We're seeing significant demand for these chips.

Andy Jassy: And we're increasingly seeing model builders standardized on SageMaker. While many teams will build their own models, lots of others will leverage somebody else's frontier model, customize it with their own data, and seek a service that provides broad model selection and great gender of AI capabilities. This is what we think of as the middle layer, what Amazon Bedrock does and why Bedrock has tens of thousands of companies using it already. Bedrock has the largest selection of models, the best gender of AI capabilities in critical areas like model evaluation, guard rails, rag and agenting, and then makes it easy to switch between different model types and model sizes.

Andy Jassy: While many teams will build their own models, lots of others will leverage somebody else's frontier model, customize it with their own data, and seek a service that provides broad model selection and great generative AI capabilities. This is what we think of as the middle layer, what Amazon Bedrock does, and why Bedrock has tens of thousands of companies using it already. Bedrock has the largest selection of models, the best generative AI capabilities in critical areas like model evaluation, guardrails, RAG, and agenting, and then makes it easy to switch between different model types and model sizes. It has recently added Anthropx Cloud 3.5 models, which are the best performing models on the planet. Meta's new Lama 3.1 models and Mistral's new large shoe models.

Andy: This is what we think of as the middle layer, what Amazon Bedrock does, and why Bedrock has tens of thousands of companies using it already.

Andy Jassy: Adidas, Bedrock has recently added Anthropics Club 3.5 models, which are the best performing models on the planet, Meta's new Lama 3.1 models, and Mestral's new large shoe models, and Lama's and Mestral's impressive performance benchmarks in open nature are quite compelling to our customers as well. At the application or top layer, we're continuing to see strong adoption of Amazon Q, the most capable generator AI-powered assistant for software development and to leverage your own data. Q is the highest known score on acceptance rate for code suggestions, but it does a lot more than provide code suggestions. It tests code, how it performs all other publicly benchmarkable competitors on catching security vulnerabilities, and leads all software development assistance on connecting multiple steps together and applying automatic action.

Andy Jassy: And Lama's and Mistral's impressive performance benchmarks in their open nature are quite compelling to our customers as well. At the application or top layer, we're continuing to see strong adoption of Amazon Q, the most capable generative AI-powered assistant for software development and to leverage your own data. Q has the highest known score and acceptance rate for code suggestions, but it does a lot more than provide code suggestions.

Andy: Meta's new Lama 3.1 models, and Mistral's new large shoe models. And Lama's and Mistral's impressive performance benchmarks in open nature are quite compelling to our customers as well.

Andy: At the application or top layer, we're continuing to see strong adoption of Amazon Q, the most capable generative AI-powered assistant for software development and to leverage your own data.

Andy: Q has the highest known score and acceptance rate for code suggestions, but it does a lot more than provide code suggestions.

Andy Jassy: It tests code, outperforms all other publicly benchmarkable competitors on caching security vulnerabilities, and leads all software development assistants on connecting multiple steps together and applying automatic action. It also saves development teams time and money on the muck nobody likes to talk about. For instance, when companies decide to upgrade from one version of a framework to another, it takes development teams many months, sometimes years, burning valuable opportunity costs and churning developers who hate this tedious, though important work. With Q's code transformation capability, Amazon has migrated over 30,000 Java JDK applications in a few months, saving the company $260 million in 4,500 developer years compared to what it would have otherwise cost. That's a game changer.

Andy: Outperforms all other publicly benchmarkable competitors on caching security vulnerabilities.

Andy Jassy: It also saves development teams time and money on the muck nobody likes to talk about. For instance, when companies decide to upgrade from one version of a framework to another, it takes development teams many months, sometimes years, burning valuable opportunity costs and churning developers who hate this tedious, though important, work. With Q's code transformation capabilities, Amazon has migrated over 30,000 Java JDK applications in a few months, saving the company 260 million dollars and 4,500 developer years compared to what it would have otherwise cost. That's a game changer. And think about how this Q transformation capability might evolve to address other elusive but highly desired migrations.

Andy: For instance, when companies decide to upgrade from one version of a framework to another, it takes development teams many months, sometimes years, burning valuable opportunity costs from churning developers who hate this tedious, though important work.

Andy: With Q's code transformation capabilities,

Speaker Change: Amazon has migrated over 30,000 Java JDK applications in a few months.

Speaker Change: saving the company $260 million and 4,500 developer years compared to what it would have otherwise cost. That's a game changer. And think about how this Q transformation capability might evolve to address other elusive but highly desired migrations.

Andy Jassy: And think about how this Q transformation capability might evolve to address other elusive but highly desired migrations. During the past 18 months, AWS has launched more than twice as many machine learning and generative AI features into general availability than all of the other major cloud providers combined. This team is cooking, but we're not close to being done adding capabilities for our customers, eTibsBase. For perspective, we've added over $2 billion in advertising revenue year-over-year and generated more than $50 billion in revenue in the trailing 12 months.

Andy Jassy: During the past 18 months, AWS has launched more than twice as many machine learning and generator AI features into general availability than all the other major cloud providers combined. This team is cooking, but we're not close to being done adding capability for our customers.

Speaker Change: During the past 18 months, AWS has launched more than twice as many machine learning and generative AI features into general availability than all of the other major cloud providers combined. This team is cooking, but we're not close to being done adding capabilities.

Andy: [inaudible]

Andy Jassy: Good tips, base. For perspective, we've added over 2 billion in advertising revenue year over year and generated more than 50 billion dollars in revenue in the trailing 12 months. Sponsored ads drive the majority of our advertising revenue today, and we see further opportunity there. Even with this growth, it's important to realize where the very beginning of what's possible in our video advertising. In May, we made our first appearance of the upfront and were encouraged by the agency and advertiser feedback on the differentiated value we offer across our content, reach signals, and ad tech. With ads in Prime Video, the exciting opportunity for brands is the ability to directly connect the advertising that's traditionally been focused on driving awareness, as is the case for TV, to a business outcome, like product sales or subscription signups.

Speaker Change: For perspective, we've added over $2 billion in advertising revenue year-over-year and generated more than $50 billion in revenue in the trailing 12 months.

Andy Jassy: Sponsored ads drive the majority of our advertising revenue today, and we see further opportunity there. But even with this growth, it's important to realize we're at the very beginning of what's possible in video advertising. In May, we made our first appearance at the upfronts and were encouraged by agency and advertiser feedback on the differentiated value we offer across our content, reach, signals, and ad tech. With ads and prime video, the exciting opportunity for brands is the ability to directly connect advertising that's traditionally been focused on driving awareness, as is the case for TV, to a business outcome, like product sales or subscription signups.

Andy: Sponsored ads drive the majority of our advertising revenue today, and we see further opportunity there. Even with this growth, it's important to realize we're at the very beginning of what's possible in our video advertising.

Andy: In May, we made our first appearance at the upfronts and were encouraged by the agency and advertiser feedback on the differentiated value we offer across our content, reach, signals, and ad tech.

Andy: With ads and prime video, the exciting opportunity for brands is the ability to directly connect advertising that's traditionally been focused on driving awareness, as is the case for TV, to a business outcome, like product sales or subscription sign-ups.

Andy Jassy: We're able to do that through our measurement and ad tech, so brands can continually improve the relevance and performance of their ads. While ads have become the norm of streaming video, we aim to have means with fewer ads than linear TV and other streaming TV providers. And of course, for customers preferring an ad-free experience, we offer that option for an additional $2.99 a month. In our stores business, we saw growth of 9% year-over-year in the North America segment and 10% year-over-year in the International segment. A few notes on our North America revenue growth rate. First, last quarter's lead day added about 100 basis points of year-over-year growth.

Andy Jassy: We're able to do that through our measurement and ad tech so brands can continually improve the relevance and performance of their ads. And while ads have become the norm in streaming video, we aim to have meaningfully fewer ads than linear TV and other streaming TV providers. And, of course, for customers preferring an ad-free experience, we offer that option for an additional $2.99 a month.

Andy: We're able to do that through our measurement and ad tech so brands can continually improve the relevance and performance of their ads.

Speaker Change: While ads have become the norm in streaming video, we aim to have meaningfully fewer ads than linear TV and other streaming TV providers. And of course, for customers preferring an ad-free experience, we offer that option for an additional $2.99 a month.

Andy Jassy: In our stores business, we saw growth of 9% year over year in the North America segment and 10% year over year in the international segment. A few notes on our North America revenue growth rate. First, last quarter's leap day added about 100 basis points to the year-over-year growth.

Speaker Change: In our stores business, we saw a growth of 9% year-over-year in the North America segment and 10% year-over-year in the international segment.

Speaker Change: A few notes on our North America revenue growth rate. First, last quarter's leap day added about 100 basis points of year-over-year growth.

Andy Jassy: Second, we're seeing lower-average selling prices, or ASPs, right now because customers continue to trade down on price when they can. More discretionary higher-ticket items like computers or electronics or TVs are growing faster for us than what we see elsewhere in the industry, but more slowly than we see in a more robust economy. And our continued faster delivery speed is earning us more of our customers' everyday essentials business.

Andy Jassy: Second, we're seeing lower average selling prices or ASPs right now because customers continue to trade down on price when they can. Higher-ticket items like computers or electronics or TVs are growing faster for us than what we see elsewhere in the industry, but more slowly than we see in a more robust economy. And our continued faster delivery speed is earning us more of our customers' everyday essentials business. Third, our seller fees are a little lower than expected, given the behavior changes we've seen from our latest fee changes.

Andy: Second, we're seeing lower average selling prices or ASPs right now because customers continue to trade down on price when they can.

Andy: More discretionary higher-ticket items like computers or electronics or TVs are growing faster for us than what we see elsewhere in the industry, but more slowly than we see in a more robust economy. And our continued faster delivery speed is earning us more of our customers' everyday essentials business.

Andy Jassy: RxPass. Third, our seller fees are a little lower than expected, given the behavior changes we've seen from our latest fee changes. While some of these issues can press short-term revenue, we generally like these trends. While consumers are being careful on price, our North American unit growth is meaningfully outpacing our sales growth as our continued work on selection, low prices, and delivery is resonating. So far this year, our speed of delivery for Prime customers has been faster than ever before, with more than 5 billion units arriving the same day or next day. The more customers experience our fast delivery, they look to Amazon for more of their shopping needs and the continued acceleration of our everyday essentials business as an example of this phenomenon.

Speaker Change: Third, our seller fees are a little lower than expected given the behavior changes we've seen from our latest fee changes.

Andy Jassy: While some of these issues compress short-term revenue, we generally like these trends. While consumers are being careful on price, our North American unit growth is meaningfully outpacing our sales growth as our continued work on selection, low prices, and delivery has resonated. So far this year, our speed of delivery for prime customers has been faster than ever before, with more than 5 billion units arriving the same day or next day. As more customers experience our fast delivery, they look to Amazon for more of their shopping needs, and the continued acceleration of our everyday essentials business is an example of this phenomenon. On seller fees, lowering apparel fees has spurred substantial year-over-year unit growth in apparel.

Andy: Well, some of these issues compress short-term revenue. We generally like these trends.

Speaker Change: While consumers are being careful on price, our North American unit growth is meaningfully outpacing our sales growth as our continued work on selection, low prices, and delivery is resonating.

Speaker Change: So far this year, our speed of delivery for prime customers has been faster than ever before, with more than 5 billion units arriving the same day or next day.

Andy: As more customers experience our fast delivery, they look to Amazon for more of their shopping needs and the continued acceleration of our everyday essentials business is an example of this phenomenon.

Andy Jassy: On seller fees, lowering apparel fees has spurred substantial year-over-year unit growth in apparel. In the incentive we've given sellers to send their items to multiple Amazon inbound facilities so they can save money, where they save us effort and money. Again, it's getting more traction than we even hope. These collective developments will benefit customers in the form of better selection, lower prices, and faster delivery speed. There's no shortage of ideas aimed at improving the experience for store's customers. For instance, we're adding even more value to Prime, recently interesting free restaurant delivery and many of our GOs.

Andy: On seller fees, lowering apparel fees has spurred substantial year-over-year unit growth in apparel. And the incentive we've given sellers to send their items to multiple Amazon inbound facilities so they can save money where they save us effort and money is getting more traction than we even hoped.

Andy Jassy: And the incentive we've given sellers to send their items to multiple Amazon inbound facilities so they can save money where they save us effort and money is getting more traction than we even hoped. These collective developments will benefit customers in the form of better selection, lower prices, and faster delivery speeds. There's no shortage of ideas aimed at improving the experience for customers. For instance, we're adding even more value to Prime, recently introducing free restaurant delivery in many of our geos, and expanding Amazon's Pharmacy RxPass to Medicare members.

Andy: These collective developments will benefit customers in the form of better selection, lower prices, and faster delivery speed.

Andy: There's no shortage of ideas aimed at improving the experience for SOAR's customers.

Speaker Change: For instance, we're adding even more value to Prime, recently introducing free restaurant delivery in many of our geos, expanding Amazon's Pharmacy RxPass to Medicare members. This is a benefit that gives subscribers all you can consume access to the most common generic medications for just $5 a month.

Andy Jassy: This is a benefit that gives subscribers all you can consume access to the most common generic medications for just $5 a month and offers a grocery subscription to help save on grocery items when shopping at our U.S. and U.K. Fresh stores.

Andy: and offering a grocery subscription to help save on grocery items when shopping our U.S. and U.K. fresh stores.

Andy Jassy: As we pursue these initiatives, we remain focused on lowering our costs to serve. We have a number of opportunities to further reduce costs, including expanding our use of automation robotics, further building out our same-day facility network, and regionalizing our inbound network. With more optimal inbound inventory placement, we expect to enable faster speeds, consolidate more orders in one box, and reduce inventory transfers once items reach a fulfillment center. These cost improvements won't happen in one quarter or one fell swoop. They take technology and process innovation with a lot of outstanding execution, but we see a path to continuing to lower our costs to serve, which is we've discussed in the past as very meaningful value for customers in our business.

Andy Jassy: As we pursue these initiatives, we remain focused on lowering our cost to serve. We have a number of opportunities to further reduce costs, including expanding our use of automation and robotics, further building out our same-day facility network, and regionalizing our inbound network. With more optimal inbound inventory placement, we expect to enable faster speeds, consolidate more orders in one box, and reduce inventory transfers once items reach a fulfillment center. But these cost improvements won't happen in one quarter or one fell swoop.

Andy: As we pursue these initiatives, we remain focused on lowering our cost to serve.

Andy: We have a number of opportunities to further reduce costs.

Andy: including expanding our use of automation and robotics.

Andy: Further building out our same-day facility network and regionalizing our inbound network.

Andy: With more optimal inbound inventory placement, we expect to enable faster speeds, consolidate more orders in one box,

Andy: and reduce inventory transfers once items reach a fulfillment center.

Andy Jassy: They require technology and process innovation with a lot of outstanding execution, but we see a path to continuing to lower our cost to serve, which, as we've discussed in the past, has very meaningful value for customers and our business. As we lower our cost to serve, we can add more low ASP selections that we can support economically, which coupled with our fast delivery puts Amazon in the consideration set for increasingly more shopping needs for customers.

Andy: These cost improvements won't happen in one quarter or one fell swoop. They take technology and process innovation with a lot of outstanding execution, but we see a path to continuing to lower our cost to serve, which, as we've discussed in the past, has very meaningful value for customers and our business.

Andy Jassy: As we lower our costs to serve, we can add more low ASP selection that we can support economically, which, coupled with our fast delivery, puts Amazon into consideration set for increasingly more shopping needs for customers.

Andy: As we lower our cost to serve, we can add more low ASP selection that we can support economically, which coupled with our fast delivery puts Amazon into consideration set for increasingly more shopping needs for customers.

Andy Jassy: A few other comments about areas in which we're invested. We remain very bullish on the medium to long-term impact of AI on every business we know and can imagine. However, the progress may not be one straight line for companies. Generative AI, especially, is quite iterative, and companies have to build muscle around the best way to solve actual customer problems.

Andy Jassy: A few other comments about areas in which we're investing. We remain very bullish on the medium to long-term impact of AI in every business we know and can imagine. The progress may not be one straight line for companies. Genre of AI especially is quite iterative, and companies have to build muscle around the best way to solve actual customer problems, but we see so much potential to change customer experiences. We see and how our gender of AI powered shopping assistant Rufus is helping customers make better shopping decisions. We see it in how our AI features that allow customers to simulate trying apparel items or changing the buying experience.

Andy: A few other comments about areas in which we're investing.

Andy: We remain very bullish on the medium to long-term impact of AI in every business we know and can imagine. The progress may not be one straight line for companies. Generative AI especially is quite iterative and companies have to build muscle around the best way to solve actual customer problems.

Andy Jassy: But we see so much potential to change customer experiences. We see it in how our generative AI-powered shopping assistant, Rufus, is helping customers make better shopping decisions. We see it in our AI features that allow customers to simulate trying apparel items or changing the buying experience. We see it in how our generative AI listing tool is enabling sellers to create new selections with a line or two of text versus the many forms previously required.

Andy: But we see so much potential to change customer experiences.

Speaker Change: We see it in how our generative AI-powered shopping assistant Rufus is helping customers make better shopping decisions. We see it in how our AI features that allow customers to simulate trying apparel items or changing the buying experience.

Andy Jassy: We see it in how our gender of AI listing tools enabling sellers to create new selection with a line or two of text versus the many forms previously required. We see it in our fulfillment centers across North America where we're rolling out Project Private Investigator which uses a combination of gender of AI and computer vision to uncover defects before products reach customers. We see it in how our gender of AI is helping our customers discover new music and video. We see it in how it's making the Lexus smart, and we see it in how our custom silicon and services like SageMaker and Bedrock are helping both our internal teams and many thousands of external companies reinvent their customer experiences and businesses.

Andy: We see it in how our generative AI listing tool is enabling sellers to create new selection with a line or two of text versus the many forms previously required.

Andy Jassy: We see it in our fulfillment centers across North America, where we're rolling out Project Private Investigator, which uses a combination of generative AI and computer vision to uncover defects before products reach customers. We see it in how our generative AI is helping our customers discover new music and video. And we see it in how it's making Alexa smarter.

Andy: We see it in our fulfillment centers across North America where we're rolling out Project Private Investigator, which uses a combination of generative AI and computer vision to uncover defects before products reach customers.

Andy: We see it in how our generative AI is helping our customers discover new music and video.

Andy Jassy: And we see it in how our custom silicon and services like SageMaker and Bedrock are helping both our internal teams and many thousands of external companies reinvent their customer experiences and businesses. We are investing a lot across the board in AI, and we'll keep doing so as we like what we're seeing and what we see ahead of us. We also continue to like the progress in Prime Video. Our storytelling is responding with our hundreds of millions of monthly viewers worldwide. And the 62 Emmy nominations Amazon MGM Studios recently received is another supporting data point.

Andy: We see it in how it's making the Lexus smarter. And we see it in how our custom silicon and services like SageMaker and Bedrock are helping both our internal teams and many thousands of external companies reinvent their customer experiences and businesses.

Andy Jassy: We are investing a lot across the board in AI, and we'll keep doing so as we like what we're seeing and what we see ahead of us.

Andy: We are investing a lot across the board in AI, and we'll keep doing so as we like what we're seeing and what we see ahead of us.

Andy Jassy: We also continue to like the progress in Prime Video. Our storytelling is resonating with our hundreds and millions of monthly viewers worldwide, and the 62 Emmy nominations Amazon MGM Studios recently received is another supporting data point. We recently debuted titles like Fallout, the second most watched original title ever for Prime Video, the Idea of You which attracted nearly 50 million viewers worldwide in The Boys which reached number one on Prime Video in 165 countries in its opening two weeks. And we continue to see momentum in live sports. We recently announced 11-year landmark deals with the NBA and the WNBA.

Andy: We also continue to like the progress in Prime Video. Our storytelling is resonating with our hundreds of millions of monthly viewers worldwide, and the 62 Emmy nominations Amazon and MGM Studios recently received is another supporting data point.

Andy Jassy: We recently debuted titles like Fallout, the second most-watched original title ever for Prime Video, The Idea of You, which attracted nearly 50 million viewers worldwide in its first two weeks on Prime Video, and Season 4 of The Boys, which reached number one on Prime Video in 165 countries in its opening two weeks, and we continue to see momentum in live sports. We recently announced 11-year landmark deals with the NBA and the WNBA.

Andy: We recently debuted titles like Fallout, the second most watched original title ever for Prime Video, The Idea of You, which attracted nearly 50 million viewers worldwide in the first two weeks on Prime Video, and Season 4 of The Boys, which reached number one on Prime Video in 165 countries in its opening two weeks.

Andy: And we continue to see momentum in live sports.

Andy Jassy: When combined with our original films and shows, partner streaming services, licensed content, and rent or buy titles, Prime Video continues to evolve into the best destination for streaming video.

Andy Jassy: When combined with our original films and shows, partner streaming services, licensed content, and rent or buy titles, Prime Video continues to evolve into the best destination for streaming video. And for Project Kuiper, our low-Earth-orbit satellite constellation, we're accelerating satellite manufacturing at our facility in Kirkland, Washington. We've announced a distribution agreement with VRIO, who distributes DirecTV Latin America and Sky Brazil, to offer Project Kuiper's satellite broadband network to residential customers across seven countries in South America.

Andy: We recently announced 11-year landmark deals with the NBA and the WNBA.

Andy: When combined with our original films and shows, partner streaming services, licensed content, and rent-or-buy titles, Prime Video continues to evolve into the best destination for streaming video.

Andy Jassy: And for Project Kuiper, our low Earth orbit satellite constellation, we're accelerating satellite manufacturing in our facility in Kirkland, Washington. We've announced a distribution agreement with Vrio, who distributes Direct TV Latin American Sky Brazil to offer Project Kuiper satellite broadband network to residential customers across seven countries in South America. And we continue to field significant demand for the service from enterprise and government entities. We expect to start shipping production satellites late this year and continue to believe this could be a very large business for us.

Andy: And for Project Kuiper, our low-Earth-orbit satellite constellation, we're accelerating satellite manufacturing at our facility in Kirkland, Washington.

Andy: We've announced a distribution agreement with Vrio, who distributes DirecTV Latin America and Sky Brazil, to offer Project Kuiper's satellite broadband network to residential customers across seven countries in South America. And we continue to feel significant demand for the service from enterprise and government entities.

Andy Jassy: And we continue to field significant demand for the service from enterprise and government entities. We expect to start shipping production satellites late this year and continue to believe this could be a very large business for us. I could go on, but we'll stop here.

Andy: We expect to start shipping production satellites late this year and continue to believe this could be a very large business for us.

Andy Jassy: I could go on, but we'll stop here. There's a lot to feel optimistic about over the next several years, and the team collectively remains focused on continuing to invent and deliver for our customers in the business.

Andy Jassy: There's a lot to feel optimistic about over the next several years, and the team collectively remains focused on continuing to innovate and deliver for our customers in the business. With that, I'll turn it over to Brian for a financial update. Thanks, Andy.

Andy: I could go on, but we'll stop here. There's a lot to feel optimistic about over the next several years, and the team collectively remains focused on continuing to invent and deliver for our customers and the business. With that, I'll turn it over to Brian for a financial update.

Ryan Olsavsky: With that, I'll turn it over to Brian for a financial update. Thanks, Andy. Let's start with our top line financial results. Worldwide revenue was $148 billion, and 11% increase year-over-year, excluding the impact of foreign exchange. It's a quake-sweigh $1 billion headwind from foreign exchange in the quarter, which is about $300 million higher than we anticipated in our QJU guidance range. Worldwide operating income nearly doubled year-over-year to $14.7 billion, which is $700 million above the high end of our guidance range. Across all of our segments, we remain focused on managing costs in a way that allows us to continue innovating and investing in areas that we think could move the needle for our customers.

Brian Olsavsky: Let's start with our top-line financial results. Worldwide revenue was $148 billion, an 11% increase year over year, excluding the impact of foreign exchange. This equates to a $1 billion headwind from foreign exchange in the quarter, which is about $300 million higher than we'd anticipated in our Q2 guidance range. Worldwide operating income nearly doubled year over year to $14.7 billion, which is $700 million above the high end of our guidance range. Across all of our segments, we remain focused on managing costs in a way that allows us to continue innovating and investing in areas that we think could move the needle for our customers.

Brian: Thanks Andy. Let's start with our top-line financial results. Worldwide revenue was $148 billion, an 11% increase year-over-year, excluding the impact of foreign exchange.

Brian: This equates to a $1 billion headwind from foreign exchange in the quarter, which is about $300 million higher than we'd anticipated in our Kiju guidance range.

Brian: Worldwide operating income nearly doubled year-over-year to $14.7 billion.

Brian: which was $700 million above the high end of our guidance range. Across all of our segments, we remain focused on managing costs in a way that allows us to continue innovating and investing in areas that we think could move the needle for our customers.

Ryan Olsavsky: Starting with the North American International segments, customers continue to respond positively to our focus on low prices, broad selection, and fast shipping offers. We delivered our fastest speeds ever so far this year, which helps drive strength in areas like our everyday essentials. These include items like non-perishable foods as well as health, beauty, and personal care items. And Prime members continue to increase their shopping frequency while growing their spend on Amazon. 7. Overall, UNIT sales grew 11% every year, which is consistent with our growth rates in Q1 after you adjust for the approximately 100 basis point impact of leap year.

Brian Olsavsky: Starting with the North American international segments, customers continue to respond positively to our focus on low prices, broad selection, and fast shipping offers. We delivered at our fastest speeds ever so far this year, which helps drive strength in areas like our everyday essentials. These include items like non-perishable foods, as well as health, beauty, and personal care items, and Prime members continue to increase their shopping frequency while growing their spend on Amazon.

Brian: Starting with the North American and international segments, customers continue to respond positively to our focus on low prices, broad selection, and fast shipping offers.

Brian: We delivered at our fastest speeds ever so far this year, which helps drive strength in areas like our everyday essentials.

Andy: These include items like non-perishable foods, as well as health, beauty, and personal care items.

Brian: And Prime members continue to increase their shopping frequency while growing their spend on Amazon.

Brian Olsavsky: Overall unit sales grew 11% year-over-year, which is consistent with our growth rates in Q1 after you adjust for the approximately 100 basis point impact of leap year. North America's segment revenue was $90 billion, an increase of 9% year-over-year, and International Segment revenue was $31.7 billion, an increase of 10% year-over-year, excluding the impact of foreign exchange. North America's segment operating income was $5.1 billion, an increase of $1.9 billion year over year. Operating margin was 5.6%, up 170 basis points year over year and down 20 basis points quarter over quarter.

Brian: Overall unit sales grew 11% year-over-year, which is consistent with our growth rates in Q1 after you adjust for the approximately 100 basis point impact of leap year.

Ryan Olsavsky: North America's segment revenue was $90 billion, an increase of 9% every year, and international segment revenue was $31.7 billion, an increase of 10% year every year, excluding the impact of foreign exchange. North America's segment operating the income was $5.1 billion, an increase of $1.9 billion every year. Operating margin was 5.6%, up 170 basis points every year, and down 20 basis points quarter over quarter. If we look at the profitability of the core North America's stores business, we actually improved our margin again quarter over quarter in Q2. The overall North America's segment operating margin decreased slightly to increase Q2 spend in some of our investment areas, including Kuiper where we're starting to manufacture satellites will launch into space in Q4.

Brian: North America's segment revenue was $90 billion, an increase of 9% year-over-year.

Brian: An international segment revenue was $31.7 billion, an increase of 10% year-over-year excluding the impact of foreign exchange. North America's segment operating income was $5.1 billion, an increase of $1.9 billion year-over-year.

Brian: Operating margin was 5.6%, up 170 basis points year-over-year, and down 20 basis points quarter-over-quarter.

Brian Olsavsky: If we look at profitability of the core North America stores business, we actually improved our margin again quarter over quarter in Q2. The overall North America segment operating margin decreased slightly due to increased Q2 spend in some of our investment areas, including Kuiper, where we're starting to manufacture satellites we'll launch into space in Q4. We saw improvements in our cost-to-serve, driven by our efforts to place inventory more regionally, closer to where our customers are. This resulted in more consolidated shipments, with higher units per box shipped. We also saw packages traveling shorter distances to customers, and this also led to better on-road productivity in our transportation network.

Andy: If we look at profitability of the core North America stores business, we actually improved our margin again quarter over quarter in Q2.

Andy: The overall North America segment operating margin decreased slightly due to increased Q2 spend in some of our investment areas, including Kuiper, where we're starting to manufacture satellites that will launch into space in Q4.

Ryan Olsavsky: We saw improvements in our costs to serve, driven by our efforts to place inventory more regionally, closer to where our customers are. This resulted in more consolidated shipments with higher units per box shipped. We also saw packages traveling shorter distances to customers. And this also led to better on-road productivity in our transportation network. Our international segment was profitable again in Q2, with operating income of $300 million, an improvement of $1.2 billion every year. Operating margin was 0.9%, up 390 basis points every year. This increase is primarily driven by our established countries as we improve our cost structure with better inventory placement and more consolidated shipments.

Andy: We saw improvements in our cost to serve, driven by our efforts to place inventory more regionally, closer to where our customers are. This resulted in more consolidated shipments, with higher units per box shipped.

Andy: We also saw packages traveling shorter distances to customers, and this also led to better on-road productivity in our transportation network.

Brian Olsavsky: Our international segment was profitable again in Q2, with operating income of $300 million and an improvement of $1.2 billion year-over-year; operating margin was 0.9%, up 390 basis points year over year. This increase is primarily driven by our established countries as we improve our cost structure with better inventory placement and more consolidated shipment. Additionally, our emerging countries continue to expand their customer offerings, leverage their cost structure, and invest in expanding prime benefits. We are pleased with the overall progress of these countries as they make strides on their respective paths to profitability.

Brian: Our international segment was profitable again in Q2, with operating income of $300 million and improvement of $1.2 billion year-over-year.

Brian: Operating margin was 0.9%, up 390 basis points year-over-year.

Brian: This increase is primarily driven by our established countries as we improve our cost structure with better inventory placement and more consolidated shipments.

Ryan Olsavsky: Additionally, our emerging countries continue to expand their customer offerings, leverage their cost structure, and invest in expanding prime benefits. We are pleased with the overall progress of these countries as they make strides on their respective paths to profitability. Advertising remains an important contributor to profitability in the North America and international segments. And we saw strong growth on increasing larger revenue base this quarter. We continue to see opportunities that further expand our offering in areas that are driving growth today, like sponsored products, as well as newer areas like Prime Video ads. Moving next to our AWS segment, revenue is $26.3 billion, an increase of 18.8% year-to-year, excluding the impact of foreign exchange.

Brian: Additionally, our emerging countries continue to expand their customer offerings, leverage their cost structure, and invest in expanding prime benefits.

Brian: We are pleased with the overall progress of these countries as they make strides on their respective paths to profitability.

Brian Olsavsky: Advertising remains an important contributor to profitability in the North America and international segments, and we saw strong growth on an increasingly larger revenue base this quarter. We continue to see opportunities that further expand our offering in areas that are driving growth today, like sponsored products, as well as newer areas like prime video ads. Moving next to our AWS segment, revenue is $26.3 billion, an increase of 18.8% year-over-year, excluding the impact of foreign exchange.

Brian: Advertising remains an important contributor to profitability in the North America and international segments, and we saw strong growth on an increasingly larger revenue base this quarter.

Brian: We continue to see opportunities that further expand our offering in areas that are driving growth today, like sponsored products, as well as newer areas, like prime video ads.

Brian: Moving next to our AWS segment, revenue is $26.3 billion, an increase of 18.8% year-over-year, excluding the impact of foreign exchange.

Ryan Olsavsky: AWS now has an annualized revenue run rate of more than $105 billion. During the second quarter, we saw continued growth across both generative AI and non-generative AI workflows. We saw companies turn their attention to newer initiatives, bring more workloads to the cloud, restart or accelerate existing migrations from on-premises to the cloud, and tap into the power of generative AI. AWS operating income was $9.3 billion, an increase of $4 billion every year. It's driven by our continued focus on cost control, including a measured pace of hiring. Additionally, AWS operating margin includes an approximately 200 basis point favorable impact from the change in the estimated useful life of our servers that we instituted in. As we've long said, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we're making at any point in time.

Brian Olsavsky: KWS now has an annualized revenue run rate of more than $105 billion. During the second quarter, we saw continued growth across both generative AI and non-generative AI workloads. We saw companies turn their attention to newer initiatives, bring more workloads to the cloud, restart or accelerate existing migrations from on-premises to the cloud, and tap into the power of generative AI. AWS operating income was $9.3 billion, an increase of $4 billion year over year, driven by our continued focus on cost control, including a measured pace of hiring.

Brian: AWS now has an annualized revenue run rate of more than $105 billion.

Brian: During the second quarter, we saw continued growth across both generative AI and non-generative AI workloads.

Brian: We saw companies turn their attention to newer initiatives, bring more workloads to the cloud, restart or accelerate existing migrations from on-premises to the cloud, and tap into the power of generative AI.

Brian: AWS operating income was $9.3 billion, an increase of $4 billion year-over-year.

Brian: It's driven by our continued focus on cost control, including a measured pace of hiring.

Brian Olsavsky: Additionally, AWS Operating Margin includes an approximately 200 basis points favorable impact from the change in the estimated useful life of our servers that we instituted in Qube One. As we've long said, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we're making at any point in time. We remain focused on driving efficiencies across the business, which enables us to invest to support the strong growth we're seeing in AWS, including generative AI. Now, let's turn our attention to capital investments. As a reminder, we define these as a combination of CapEx plus equipment finance leases. For the first half of the year, CapEx was $30.5 billion.

Brian: Additionally, AWS Operating Margin includes an approximately 200-basis-point favorable impact from the change in the estimated useful life of our servers that we instituted in Qube 1.

Brian: As we have long said, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we're making at any point in time.

Ryan Olsavsky: We remain focused on driving efficiencies across the business, which enables us to invest to support the strong growth we're seeing in AWS, including Gen or AI.

Ryan Olsavsky: Now let's turn our attention to capital investments. As a reminder, we define these as the combination of CapEx plus equipment finance leases. For the first half of the year, CapEx was $30.5 billion. Forging ahead to the rest of 2024, we expect capital investments to be higher in the sector. The majority of the spend will be to support the growing need for AWS infrastructure, as we continue to see strong demand in both Gen or AI and our non-gen or AI workloads. For the third quarter, specifically, I'd highlight a few seasonal factors to keep in mind. First, we hosted another successful Prime Day in mid July, which was our 10th Prime Day and was our largest ever.

Brian Olsavsky: Looking ahead to the rest of 2024, we expect capital investments to be higher in the second half of the year. The majority of this spend will be to support the growing need for AWS infrastructure as we continue to see strong demand for both generative AI and our non-generative AI workloads. For the third quarter, specifically, I'd highlight a few seasonal factors to keep in mind. First, we hosted another successful Prime Day in mid-July. It was our 10th Prime Day and was our largest ever. Prime members globally saved billions of dollars on deals across every product category.

Brian: Looking ahead to the rest of 2024, we expect capital investments to be higher in the second half of the year. The majority of the spend will be to support the growing need for AWS infrastructure, as we continue to see strong demand in both generative AI and our non-generative AI workloads.

Ryan Olsavsky: Prime members globally saved billions of dollars on deals across every product category. From a profitability perspective, we've historically seen a headwind to operating margin in Q3, driven by Prime Day deals, as well as the marketing spend surrounding the event. Additionally, in Q3, we also begin to ramp up our capacity to handle Q4 holiday volumes and our fulfillment network. And lastly, we expect an increase in digital content cost quarter of a quarter from the return of our NFL Thursday Night Football. We remain head down, focused on driving a better customer experience, who believe putting customers first is the only reliable way to create lasting value for our shareholders.

Brian Olsavsky: From a profitability perspective, we've historically seen a headwind to operating margin in Q3, driven by prime Day deals, as well as the marketing spend surrounding the event. Additionally, in Q3, we also begin to ramp up our capacity to handle Q4 holiday volumes in our fulfillment network. And lastly, we expect an increase in digital content cost quarter over quarter from the return of our NFL Thursday Night Football. We remain heads down, focused on driving a better customer experience. We believe putting customers first is the only reliable way to create lasting value for our shareholders. With that said, let's move on to your questions. At this time, we will now open the call up for

Brian: From a profitability perspective, we've historically seen a headwind to operating margin in Q3, driven by Prime Day deals, as well as the marketing spend surrounding the event.

Brian: Additionally, in Q3, we also begin to ramp up our capacity to handle Q4 holiday volumes in our fulfillment network. And lastly, we expect an increase in digital content cost quarter over quarter from the return of our NFL Thursday Night Football.

Speaker Change: We remain heads down, focused on driving a better customer experience. We believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.

Operator: With that, let's move on to your questions. At this time, we will now open the call up for questions. We ask each caller to please limit yourself to one question. If you would like to ask a question, please press star one on your keypad. We ask that when you pose your question, you pick up your hands up to provide optimum sound quality. Once again, to initiate a question, please press star, then one on your touch-tone telephone at this time.

Operator: At this time, we will now open the call up for questions. We ask each caller to please limit themselves to one question. If you would like to ask a question, please press star 1 on your keypad. We ask that when you ask your question, you pick up your handsets to provide optimum sound quality. Once again, to initiate a question, please press star, then 1 on your touchtone telephone. At this time, please hold while we poll for questions, and our first question comes from the line of Eric Sheridan with Goldman Sachs. Please proceed with your question.

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: If you would like to ask a question, please press star 1 on your keypad. We ask that when you pose your question, you pick up your handsets to provide optimum sound quality. Once again, to initiate a question, please press star, then 1 on your touch-tone telephone at this time.

Operator: Please hold what we pull for questions.

Andy: Please hold while we poll for questions.

Eric Sheridan: And our first question comes from the line of Eric Sheridan with Goldman Sachs. Please proceed with your question. Thanks so much for taking the question, and thanks for all the detail in the prepared remarks.

Eric Sheridan: Thanks so much for taking the question and thanks for all the detail and the prepared remarks. Maybe a two-parter on AWS? There's been a theme during the last couple of weeks of earnings of the potential to overinvest as opposed to underinvest in AI as a broad theme. I'm curious, Andy, if you have a perspective on that in terms of thinking about elements of capitalizing on the theme longer term against the potential for pace and cadence of investment in AWS as a segment.

Speaker Change: And our first question comes from the line of Eric Sheridan with Goldman Sachs. Please proceed with your question.

Eric Sheridan: Maybe a two-parter on AWS. There's been a scene during the last couple of weeks of earnings of the potential to over and vast. As opposed to under-invest in AI as a broad theme.

Eric Sheridan: Thanks so much for taking the question and thanks for all the detail in the prepared remarks. Maybe a two-parter on AWS. There's been a theme during the last couple of weeks of earnings of the potential to over-invest.

Andy Jassy: I'm curious, Andy, if you have a perspective on that in terms of thinking about elements of capitalizing on the theme longer term against the potential for peace, a cadence of investment behind AWS is a segment. And the second part will be coming back to your comments on custom silicon. How do you feel about custom silicon, both from a piece of investment, and then more broadly, how you think about it as a return profile on a pivot to more custom silicon near portfolio over the medium to long term. Thanks so much.

Eric Sheridan: as opposed to underinvest in AI as a broad theme. I'm curious, Andy, if you have a perspective on that in terms of thinking about elements of capitalizing on the theme longer term against the potential for pace and cadence of investment, find AWS as a segment. And the second part would be coming back to your comments on custom silicon. How do you feel about custom silicon, both from a piece of investment and then more broadly, how you think about it as a return profile on a pivot to more custom silicon in your portfolio over the medium to long term? Thanks so much.

Eric Sheridan: And the second part would be coming back to your comments on custom silicon. How do you feel about custom silicon, both as a piece of investment and then, more broadly, how do you think about it as a return profile on a pivot to more custom silicon in your portfolio over the medium to long term? Thanks so much.

Andy Jassy: I think on the question about investment in AWS and on the AI side, I think where I'd start is that I think one of the least understood parts about AWS over the last 18 years has been what a massive logistics challenge it is to run that business. If you think about the fact that we have about 35 regions and think of a region as a cluster of multiple data centers, and about 110 availability zones, which is roughly equivalent to a data center, Sometimes it includes multiple.

Andy Jassy: Thanks, Eric. I'll take them in order. I think on the question about investment in AWS on the AI side, I think where I start is I think one of the least understood parts about AWS over the last 18 months. New Year's has been what a massive logistics challenge it is to run that business. If you think about the fact that we have about 35 regions and think of a region as multiple clusters of multiple data centers and about 110 availability zones, which is roughly equivalent to a data center; sometimes it includes multiple. And then, if you think about having to land thousands and thousands of SKUs across the 200 AWS services and each of those availability zones at the right quantity, it's quite difficult.

Andy Jassy: Thanks, Eric. I'll take them in order.

Andy: Thanks Eric. I'll take them in order. I think on the question about investment in AWS and on the AI side, I think where I'd start is I think one of the

Speaker Change: Least understood parts about AWS over the last 18 years has been what a massive logistics challenge it is to run that business. If you think about the fact that we have about 35 regions, and think of a region as a cluster of multiple data centers,

Speaker Change: and about 110 availability zones, which is roughly equivalent to a data center. Sometimes it includes multiple.

Andy Jassy: And then if you think about having to land thousands and thousands of SKUs across the 200 AWS services in each of those availability zones at the right quantities, it's quite difficult. And if you end up actually with too little capacity, then you have service disruptions, which really nobody wants because it means companies can't scale their applications. So most companies deliver more capacity than they need. However, if you actually deliver too much capacity, the economics are pretty woeful, and you don't like the returns on operating income.

Speaker Change: And then if you think about having to land...

Speaker Change: Thousands and thousands of SKUs across the 200 AWS services in each of those availability zones.

Andy Jassy: And if you end up actually with two little capacity, then you have service disruptions, which really nobody does because it means companies can't scale their applications. So most companies deliver more capacity than they need. However, if you actually deliver too much capacity, the economics are pretty woeful, and you don't like the returns of the operating income. And I think you can tell from having, you know, we disclosed both our revenue and our operating income in AWS that we've learned over time to manage this reasonably well. And we have built models over a long period of time that are algorithmic and sophisticated that land the right amount of capacity.

Speaker Change: At the right quantities, it's quite difficult, and if you end up actually with too little capacity, then you have service disruptions, which really nobody does, because it means companies can't scale their applications. So most companies deliver more capacity than they need. However,

Speaker Change: If you actually deliver too much capacity, the economics is pretty woeful and you don't like the returns of the operating income.

Andy Jassy: And I think you can tell from having, you know, we disclosed both our revenue and our operating income in AWS that we've learned over time to manage this reasonably well. And we have built models over a long period of time that are algorithmic FISTA-K that allocate the right amount of capacity, and we've done the same thing on the AI side. Now, AI is newer.

Andy: And I think you can tell from having, you know, we disclosed both our revenue and our operating income in AWS that we've learned over time to manage this reasonably well. And we have built models over a long period of time that are algorithmic.

Andy Jassy: And we've done the same thing on the AI side. Now AI is newer, and it's true that people take down clumps of capacity and AI that are different sometimes. I mean, but it's also true that it's not like a company shows up to do a training cluster asking for a few hundred thousand chips. You know, the same day, like you have, you have a very significant advanced signal when you have customers that want to take down a lot of capacity. So, while the models are more fluid, it's also true that we've built, I think, a lot of muscle and skill over time and building these capacity signals and models, and we also are getting a lot of signal from customers and what they need.

Andy Jassy: And it's true that people take down clumps of capacity in AI that are different sometimes. But it's also true that it's not like a company shows up to do a training cluster, asking for a few hundred thousand chips, you know, the same day, like you have a very significant advanced signal when you have customers that want to take down a lot of capacity. So while the models are more fluid, it's also true that we've built, I think, a lot of muscle and skill over time building these capacity signals and models.

Andy: AI is newer. And it's true that people take down clumps of capacity in AI that are different sometimes. I mean, but it's also true

Andy: that it's not like a company shows up to do a training cluster asking for a few hundred thousand chips you know the same day like you have you have a very significant advanced signal.

Andy: when you have customers that want to take down a lot of capacity.

Andy: While the models are more fluid...

Andy: It's also true that we've built, I think, a lot of muscle and skill over time in building these capacity signals and models.

Andy Jassy: And we also are getting a lot of signals from customers about what they need. You know, I think that it's, you know, the reality right now is that while we're investing a significant amount in the AI space and infrastructure, we would like to have more capacity than we already have today. I mean, we have a lot of demand right now, and I think it's going to be a very, very large business for us. On the custom silicon point, you know, it's really interesting what's happened here.

Andy Jassy: You know, I think that it's, you know, the reality right now is that while we're investing a significant amount in the AI space and an infrastructure, we would like to have more capacity than we already have today. I mean, we have a lot of demand right now. And I think it's going to be a very, very large business for us.

Andy: and we also are getting a lot of signal from customers and what they need. You know, I think that it's, you know, the reality right now is that while we're investing a significant amount in the AI space and in infrastructure,

Andy: We would like to have more capacity than we already have today. I mean, we have a lot of demand right now. And I think it's going to be a very, very large business for us.

Andy Jassy: On the custom silicon point, you know, it's really interesting what's happened here. And it's also our strategy and approach here has been informed by running AWS for 18 years. You know, when we started AWS, we had and still have a very deep partnership with Intel on the generalized CPU space. But what we found from customers is that they, when you, when you find a really high value for you in high return, you don't actually spend less, even though you're spending less per unit; you spend less per unit, but it enables you and frees you up to do so much more inventing and building for your customers.

Andy: On the custom silicon point...

Andy Jassy: And it's also our strategy and approach here has been informed by running AWS for 18 years. You know, when we started AWS, we had and still have a very deep partnership with Intel in the generalized CPU space. But what we found from customers is that when you find an offering that is really high value for you and high return, you don't actually spend less, even though you're spending less per unit. You spend less per unit, but it enables you and frees you up to do so much more inventing and building for your customers.

Andy: You know, it's really interesting what's happened here, and it's also, our strategy and approach here has been informed by running AWS for 18 years. You know, when we started AWS, we had, and still have, a very deep partnership with Intel on the generalized CPU.

Andy: Space. But what we found from customers is that they, when you're, when you find a, an offering that is really high value for you and high return,

Andy: You don't actually spend less even though you're spending less per unit you spend less per unit But it enables you and frees you up to do so much more inventing and building for your customers

Andy Jassy: And then when you're spending more, you actually want better price performance than what you're getting. And a lot of times, it's hard to get that price performance from existing players unless you decide to optimize yourself for what you're learning from your customers, and you push that envelope yourself. And so we built custom silicon in a generalized CPU space with Graviton, which we're on our fourth model right now, and that has been very successful for customers and for our AWS businesses.

Andy Jassy: And then, when you're spending more, you actually want better price performance than what you're getting. And a lot of times, it's hard to get that price performance from existing players unless you decide to optimize yourself for what you're learning from your customers, and you push that envelope yourself. And so we built custom silicon in the generalized CPU space with Graviton, which we're on our fourth model right now. And that has been very successful for customers and for our AWS businesses. It saves customers about up to about 30 to 40 percent in price performance versus the other reading x86 processors that they could use.

Andy: And then when you're spending more, you actually want better price performance than what you're getting. And a lot of times, it's hard to get that price performance from existing players unless you decide to optimize yourself for what you're learning from your customers and you push that envelope yourself.

Speaker Change: And so we built custom silicon in a generalized CPU space with Graviton, which we're on our fourth model right now. And that has been very successful for customers and for our AWS businesses.

Andy Jassy: It saves customers up to about 30 to 40% in price performance versus the other leading x86 processors that they could use. And we saw this same trend happening about five years ago in the accelerator space, in the GPU space, where the products are good, but there was really primarily one provider, and supply was more scarce than what people wanted. And our customers really want improved price performance all the time. And so that's why we went about building Tradium, which is our trading chip, and Inferentia, which is our inference chip. We're on the second versions of both of those.

Speaker Change: saves customers about up to about 30 to 40 percent price performance versus the other leading x86 processors that they could use.

Andy Jassy: And we saw the same trend happening about five years ago in the accelerator space and the GPU space where the products are good, but there was really primarily one provider, and supply was more scarce than what people wanted. And people are customers really want improved price performance all the time. And so that's why we went about building training, which is our training chip, and inferential, which is our inference chip, which we're on second versions of both of those. They will have very compelling relative price performance. and in a world where it's hard to get GPUs today, the supply is scarce and all the schedules continue to move over time.

Andy: And we saw this same trend happening about five years ago in the accelerator space, in the GPU space, where the products are good, but there was really primarily one provider and supply was more scarce than what people wanted.

Andy: And our customers really want improved price performance all the time. So that's why we went about building Trainium, which is our training chip, and Inferentia, which is our inference chip.

Andy Jassy: They will have very compelling relative price performance. And in a world where it's hard to get GPUs today, the supply is scarce, and all the schedules continue to move over time. Customers are quite excited and demanding at a high clip for our custom silicon, and we're producing it as fast as we can. I think that's going to have a very good return profile, just like Graviton has, and I think it will be another differentiating feature around AWS relative to others.

Andy: which we're on second versions of both of those they will have very compelling relative price performance

Andy: And in a world where it's hard to get GPUs today, the supply is scarce.

Andy Jassy: Customers are quite excited and demanding at a high clip; our custom silicon, and we're producing it as fast as we can. I think that's going to have a very good return profile just like Graviton has, and I think it will be another differentiating feature around AWS relative to others.

Andy: All the schedules continue to move over time.

Andy: Customers are quite excited and demanding at a high clip our custom silicon, and we're producing it as fast as we can.

Andy: I think that's going to have a very good return profile, just like Graviton has, and I think it will be another differentiating feature around AWS relative to others.

Brian Nowak: And our next question comes from the line of Brian, no ask, but Morgan Stanley. Please proceed with the question. Thanks for taking my questions. I have two.

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

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

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

Brian Nowak: So the first one I wanted to ask about in the second quarter, the retail gross margins, and we're trying to do the monkey math here, look a little weaker than expected. Was there any extra pressure on retail gross margins because of discounting? Or is that where Kuiper is?

Brian Nowak: So the first one I wanted to ask about in the second quarter, the retail gross margins that we're trying to do the monkey math look a little weaker than expected. Was there any extra pressure on retail gross margins because of discounting, or is that what Kuiper is? Or how do we think about some of the drivers of retail gross margins and the quarter x shipping?

Brian Nowak: Thanks for taking my questions. I have two. So the first one I wanted to ask about, in the second quarter, the retail gross margins, and we're trying to do the monkey math, look a little weaker than expected. Was there any extra pressure on retail gross margins because of discounting? Or is that where Kuiper is? Or sort of how do we think about some of the drivers of retail gross margins in the quarter X shipping?

Brian Olsavsky: And the second one, Andy, in the past you talked about cost to serve improvement and sort of getting the North America margins back to pre-pandemic levels. So can you just remind us again, sort of the internal philosophy about executing on that? Is there a timeline to deliver on that sort of how are you sort of balancing showing that profitability improvement over the next couple of years versus pressing on new investments like Kuiper and perhaps reinvesting some of those profits.

Andy: And the second one, Andy, in the past, you've talked about cost-to-serve improvements and sort of getting the North America margins back to pre-pandemic levels.

Andy: Can you just remind us again, sort of the internal philosophy about executing on that? Is there a timeline to deliver on that? How are you sort of balancing showing that profitability improvement over the next couple of years versus pressing on new investments like Kuiper and perhaps reinvesting some of those profits over the next couple of years?

Brian Olsavsky: Brian, let me start with the first question on North America margins. So if you look at the segment operating margins, we did decrease 20 basis points sequentially from Q1 to Q2. I'll remind you that we have to see the annual step up and stock-based compensation at the end of Q1 each year. And that added about a billion eight to a stock-based comp expense in Q2 versus Q1. I think to some extent all three segments, but even with that stock based comp step up the stores part of the North America segment increase the margin again last quarter.

Brian Nowak: Or sort of how do we think about some of the drivers of retail gross margins in the quarter X shipping? And the second one, Andy, in the past, you've talked about cost to serve improvement and sort of getting North America margins back to pre-pandemic levels. Can you just remind us again of the internal philosophy about executing on that? Is there a timeline to deliver on that? So how are you sort of balancing showing that profitability improvement over the next couple years versus pressing on with new investments like Kuiper and perhaps reinvesting some of those profits over the next couple years?

Andy: Hey Brian , let me start with the first question on North America margins. So if you look at the segment operating margins, we did decrease 20 basis points sequentially from Q1 to Q2.

Speaker Change: I'll remind you that we see the annual step-up in stock-based compensation at the end of Q1 each year, and that added about $1.8 billion of stock-based comp expense in Q2 versus Q1, so that's impacting, to some extent, all three segments.

Brian Olsavsky: Yeah, Brian, let me start with the first question on North America margins. So if you look at the segment operating margins, we did decrease 20 basis points sequentially from Q1 to Q2. I'll remind you that we see an annual step-up in stock-based compensation at the end of Q1 each year, and that added about $1.8 billion of stock-based comp expense in Q2 versus Q1.

Andy: Even with that stock-based comp step up, the stores part of the North America segment

Brian Olsavsky: So we're continuing to see strong improvements in cost to serve, as well as improvement speed, added selection, better safety. So a lot of the key areas that we're hitting on are strong. What you're seeing for the segment is that some of our investment areas had a pickup in expenses and investment in Q2 versus Q1. That's not unheard of. Q1 is usually the lightest investment quarter. Things like Prime Video and devices have less investment going on in those quarters.

Andy: increase the margin again last quarter. So we're continuing to see strong improvements in cost to serve as well as improvement in speed.

Speaker Change: Added Selection, Better Safety. So a lot of the key areas that we're hitting on.

Brian Olsavsky: are strong. What you're seeing for the segment is that some of our investment areas had a tick up in expenses and investment in Q2 versus Q1. That's not unheard of. Q1 is usually the lightest investment quarter. Things like

Brian Olsavsky: But the one thing I'd point out, I think we mentioned, is Kiper is stepping up a bit in Q2 versus Q1 as we start to build satellites that will launch in Q3 and Q4 this year.

Brian Olsavsky: So that's impacting, to some extent, all three segments. But even with that stock-based comp step up, the stores part of the North America segment increased its margin again last quarter. So we're continuing to see strong improvements in cost to serve, as well as improvements in speed, added selection, and better safety. So a lot of the key areas that we're hitting on are strong. But the one thing I'd point out, I think we mentioned it, is Kuiper is stepping up a bit in Q2 versus Q1 as we start to build satellites that will launch in Q3 and Q4 this year.

Andy: Prime Video and devices have less investment going on in those quarters, but the one thing I'd point out, I think we mentioned it, is Kuiper is stepping up a bit in Q2 versus Q1 as we start to build satellites that will launch in Q3 and Q4 this year.

Andy Jassy: And your second question, Brian, you know, I continue and the team continues to believe that we have the opportunity to expand the margin in our stores business. And, as I've said on a number of the calls that we've done, it's not going to happen in one quarter. It's not going to one happen in one fell swoop. It's going to take work over a long period of time. But, you know, I think that one of one of it.

Andy Jassy: And your second question, Brian, I continue, and the team continues to believe that we have the opportunity to expand the margin in our stores business. And, you know, as I've said on a number of the calls that we've done, it's not going to happen in one quarter, it's not going to happen in one fell swoop, it's going to take work over a long period of time. But, you know, I think that one of the, "Silver Linings," if you will, about a year and a half ago and the ricochet of the pandemic and all the growth that we had and the cost to serve challenges that we had was that it really forced us to reevaluate everything in the network and really even our most closely felt beliefs over a long period of time.

Andy: And your second question, Brian , you know, I continue and the team continues to believe

Andy: that we have the opportunity to expand the margin in our stores business and

Andy: As I've said on a number of the calls that we've done, it's not going to happen in one quarter. It's not going to happen in one fell swoop. It's going to take work over a long period of time. But I think that one of the...

Andy Jassy: Silver Linings, if you will, about a year to half ago in the ricochet of the pandemic and all the growth that we had and the cost to serve challenges that we had, was it really forced us to re-evaluate everything in the network. And really, even our most closely felt beliefs over a long period of time. And what it did was it unveiled a number of opportunities that we believe we have to keep driving cost to serve down. And the first one that you've seen play out over the last year or so has been the regionalization of the US network.

Andy: Silver Linings, if you will, about a year and a half ago, and the ricochet of the pandemic and all the growth that we had and the cost to serve challenges that we had was

Andy: It really forced us to reevaluate everything in the network and really even our most closely felt beliefs.

Andy Jassy: And what it did was it unveiled a number of opportunities that we believe we have to keep driving costs to serve down. The first one that you've seen play out over the last year or so has been the regionalization of the U.S. network.

Andy Jassy: Over a long period of time, and what it did was it unveiled a number of opportunities that we believe we have to keep driving cost to serve down. And the first one that you've seen...

Andy Jassy: play out over the last year or so has been the regionalization of the U.S. network.

Andy Jassy: And I think one thing to remember about that is that while it's had even bigger impact than maybe we theorized when we first architected it, we're still not done fully honing it. There's a lot of ways that we continue to optimize that US regionalization that we think will continue to bear lower costs to serve. But at the same time, we found a number of other areas where we believe we can take our costs down while also improving the customer experience. One of the great things about regionalization was it not only took our cost to serve down, but it meaningfully changed the speed with which we're able to get items to customers.

Andy Jassy: And I think one thing to remember about that is that while it's had an even bigger impact than maybe we theorized when we first architected it, we're still not done fully honing it. There are a lot of ways that we continue to optimize that U.S. regionalization that we think will continue to bear lower costs to serve. But at the same time, we found a number of other areas where we believe we can take our costs down while also improving the customer experience.

Andy Jassy: And I think one thing to remember about that...

Andy: is that while it's had even bigger impact than maybe we theorized when we first architected it, we're still not done fully honing it. There's a lot of ways that we continue to optimize that U.S. regionalization that we think will continue to bear lower costs to serve.

Andy: But at the same time, we found a number of other areas where we believe we can take our costs down while also improving the customer experience. One of the great things about regionalization was...

Andy Jassy: One of the great things about regionalization is that it not only took our cost to serve down, but it meaningfully changed the speed with which we're able to get items to customers. And so we have a number of those other opportunities.

Andy: It not only took our cost to serve down, but it meaningfully changed the speed with which we're able to get items to customers. And so, we have a number of those other opportunities. You know, another example that is regionalizing our inbound network.

Andy Jassy: And so we have a number of those other opportunities. Another example that is regionalizing our inbound network, which is also going to lower our cost to serve and get items more close to end users and diminish the amount of time it takes to get them to customers. We have a number of things that we're working on to allow us to combine more units per box, which lowers our costs as well. And a lot of customers like that better because it's better for the environment having more units per box. So I think we have a lot of opportunities to continue to take down our cost to serve.

Andy Jassy: Another example of that is regionalizing our inbound network, which is also going to lower our cost to serve and get items more close to end users and diminish the amount of time it takes to get them to customers. We have a number of things that we're working on that allow us to combine more units per box, which lowers our costs as well. And a lot of customers like that better because it's better for the environment to have more units per box.

Andy: which is also going to lower our cost to serve and get items more close to end users and diminish the amount of time it takes to get them to customers. We have a number of things that we're working on that allow us to combine more units per box which lowers our costs as well and a lot of customers.

Andy Jassy: So I think we have a lot of opportunities to continue to take down our cost to serve. Strategically and philosophically, just two other things, as you were alluding to that question, I think that from our perspective, as we're able to take costs to serve down, it means that we're able to afford to have more selection that we're able to offer to customers. And there are a lot of lower ASP items there, average selling price items, that we don't stock because they're not economical to stock with our current cost to serve.

Andy Jassy: like that better because it's better for the environment, having more units per box. So I think we have a lot of opportunities to continue to take down our cost to serve. And strategically and philosophically, just two other things, as you were alluding to that question. I think that from our perspective,

Andy Jassy: And strategically and philosophically, just two other things, as you were alluding to that question, I think that from our perspective, as we're able to take costs to serve down, it means that we're able to afford to have more selection that we're able to offer to customers. And there are a lot of lower ASP items there, average selling price items, that we don't stock because they're not economic to stock with our current cost to serve. But as we work hard and make progress, like we are on lower our cost to serve, that allows us to add more selection.

Andy Jassy: as we're able to take costs served down.

Andy Jassy: It means that we're able to afford to have more selection that we're able to offer to customers. And there are a lot of lower ASP items there, average selling price items.

Andy Jassy: But as we work hard and make progress like we are on lowering our cost to serve, that allows us to add more selection. And we see this time in and time out that when we add more selection, customers actually consider us for more of their purchases and spend more with us down the line. I think the other thing too, I would tell you is that I don't see it as being binary in any way, nor have I really ever seen it this way in the history of the company. I've been here 27 years.

Andy: that we don't stock because they're not economic to stock with our current cost to serve. But as we work hard and make progress like we are on lowering our cost to serve, that allows us to add more selection. And we see this time in and time out that when we add more selection,

Andy Jassy: And we see this time and a time out that when we add more selection, customers actually consider us for more of their purchases and spend more with us down the line.

Andy Jassy: I think the other thing too I would tell you is that I don't see it as being binary in any way, nor have I really ever seen it this way in the history of the company. I've been here 27 years. But we don't think of it as we can either be investing or we can be working on trying to take our costs to serve down. We believe we can do both. If you think about the examples you gave, the stores business and the Kuiper business, they're just different people working on those businesses. So our stores team is going to continue to work really hard on expanding selection and keeping prices low and speeding up our delivery times and driving our costs to serve down.

Andy: customers actually consider us for more of their purchases and spend more with us down the line. I think the other thing too, I would tell you is that

Speaker Change: I don't see it as being binary in any way, nor have I really ever seen it this way in the history of the company. I've been here 27 years, but, you know, we don't think of it as we can either be investing

Andy Jassy: But, you know, we don't think of it as we can either be investing, or we can be working on trying to take our cost to serve down. We believe we can do both. If you think about the examples you gave, the stores business and the Kuiper business are, they're just different people working in those businesses. So our stores team is going to continue to work really hard on expanding selection and keeping prices low and speeding up our delivery times and driving our cost to serve down.

Speaker Change: or we can be working on trying to take our cost to serve down. We believe we can do both.

Andy: If you think about the examples you gave, the Storz business and the Kuiper business are just different people working on those businesses. So our Storz team is going to continue to work really hard on expanding selection and keeping prices low and speeding up.

Andy Jassy: While our Kuiper team is working on how to figure out how to help the 400 to 500 million households around the world who don't have broadband connectivity, get that connectivity and allow them to do a lot of the things we take for granted today with broadband connectivity.

Andy Jassy: While our Kuiper team is working on how to help the 400 to 500 million households around the world who don't have broadband connectivity get that connectivity and allow them to do a lot of the things we take for granted today with broadband connectivity. So they're not going to be binary. We're going to work on them both at the same time.

Andy: Our Delivery Times and Driving Our Costs to Serve Now.

Andy: While our Kuiper team is working on how to figure out how to help the 400 to 500 million households around the world who don't have broadband connectivity get that connectivity and allow them to do a lot of the things we take for granted today with broadband connectivity. So they're not going to be binary, we're going to work on them both at the same time.

Operator: at the same time.

Mark Mahaney: And our next question comes from the line of Mark Mahaney, with Evercore. Please proceed with your question. Thanks. I'll ask two questions. AWS, those three factors that are causing that kind of acceleration in Q2 recovery and growth rates from a year ago, those sound sustainable. Is there any reason that we shouldn't see sort of ongoing, you know, acceleration at some level through the back half of the year? And secondly, I just want to ask about a small segment of the pharmacy. It seems to me like, like anecdotally, I've seen you lean into more into marketing for that, and survey work suggests us that there's kind of grave or consumer interest in that.

Operator: And our next question comes from the line of Mark Mahaney with Evercore. Please proceed with your question.

Speaker Change: And our next question comes from the line of Mark Mahaney with Evercore. Please proceed with your question.

Mark Mahaney: Hey, thanks. I'll ask you two questions. AWS, those three factors that are causing that kind of acceleration in Q2 and recovery and growth rates from a year ago, those sound sustainable. Is there any reason that we shouldn't see some sort of ongoing, you know, acceleration at some level through the back half of the year? And secondly, I just want to ask about a small pharmacy segment. It seems to me like, at least anecdotally, I've seen you lean more into marketing for that.

Mark Mahaney: And survey work suggests to us that there's kind of greater consumer interest in that. Just talk about where that business is for you, and is it at a point where you feel like you've moved beyond early adoption and are leaning into kind of getting more mass Amazon customer adoption? Thank you.

Mark Mahaney: Just talk about where that business is, you know, for you.

Mark Mahaney: Survey work suggests to us that there's kind of greater consumer interest in that. Just talk about where that business is, you know, for you. And is it a point where you feel like you've moved beyond early adoption and are leaning into kind of getting more mass Amazon customer adoption? Thank you.

Andy Jassy: And as at a point where you feel like you move beyond early adoption and are leaning into kind of getting more mass Amazon customer adoption, thank you. On the AWS question, you know, it's always hard to predict what the growth rates are going to be, and you know, it's a relatively large business at a $105 billion dollar revenue run rate at this point. But I do think that we have seen the lion's share of the cost optimization happen. And I also do believe that, you know, pre-pandemic, we were on this march where most companies are trying to figure out how to modernize their infrastructure, which really means moving from on premises to the cloud, because they can save money and invent more quickly and get better developer productivity.

Andy Jassy: On the AWS question, you know, it's always hard to predict what the growth rates are going to be. And, you know, relatively large business at a $105 billion revenue run rate at this point. But I do think that we have seen the lion's share of the cost optimization happen. And I also believe that, you know, pre-pandemic, we were on this march where most companies were trying to figure out how to modernize their infrastructure, which really means moving from on-premises to the cloud because they could save money and innovate more quickly and get better developer productivity. And then the pandemic happened, and people were in survival mode, and then the difficult economy came, and people were trying to save money.

Andy Jassy: On the AWS question, you know, it's always hard to predict what the growth rates are going to be. And, you know, it's a relatively large business at $105 billion.

Andy Jassy: Revenue Run Rate at this point, but I do think

Andy: that we have seen the lion's share of the cost optimization happen.

Andy Jassy: And I also do believe that, you know, pre-pandemic, we were on this march where most companies were trying to figure out how to modernize their infrastructure, which really means moving from on-premises to the cloud, because they can save money and invent more quickly.

Andy Jassy: And then the pandemic happened, and people were in survival mode, and then a difficult economy came, and people were trying to save money. And we just see people going back to asking themselves, why aren't we taking this little hanging fruit here? I mean, I don't want to run my own data centers. I can actually be more cost effective and invent more quickly from my customers if I'm using the cloud. And AWS, with just a lot more functionality, stronger operational performance and security, which really matters to customers as well, and a deeper partner ecosystem, continues to be the partner of choice as people are moving the cloud.

Andy: Pandemic happened, and people were in survival mode, and then a difficult economy came, and people were trying to save money, and we just see people going back to asking themselves, why aren't we taking this low-hanging fruit here? I mean, it makes – I don't want to run my own data centers. I can actually be more cost-effective and invent more quickly for my customers if I'm using the cloud.

Andy Jassy: And we just see people going back to asking themselves, why aren't we taking this low-hanging fruit here? I mean, it makes sense. I don't want to run my own data centers. I can actually be more cost-effective and innovate more quickly for my customers if I'm using the cloud. And AWS, with just a lot more functionality, stronger operational performance, and security, which really matters to customers as well, and a deeper partner ecosystem, continues to be the partner of choice as people are moving to the cloud.

Andy Jassy: And AWS with just a lot more functionality, stronger operational performance and security, which really matters to customers as well, and a deeper partner ecosystem continues to be the partner of choice as people are moving the cloud.

Andy Jassy: And, you know, I think the generative AI component is in its very early days. As I said, we kind of sometimes look at it and say, it's interesting that we have a multibillion-dollar revenue run rate already in AI, and it's so early. But if we look at the amount of demand that we have from customers right now, it's very significant. So I think all three of those things have a chance and will likely continue over time, and we'll see where that growth rate nets out over the next number of years.

Andy Jassy: And, you know, I think the gendered of AI component is in its very early days. You know, it's, as I said, we kind of sometimes look at it and say that it's interesting that we have a multi-billion dollar revenue run rate already at AI, and it's so early. But if we look at the amount of demand that we have from customers right now, it's very significant. So I think all three of those things have a chance, and we'll likely continue over time, and we'll see where that growth rate nets out over, you know, over the next number of years.

Andy Jassy: I think that, you know, the one other thing I would say about that, Mark, is that today, as I mentioned, it's a $105 billion revenue run rate business; about 90% of the global IT spend is still on premises. And if you believe that equation is going to flip, which I do, there's a lot of growth ahead of us at AWS as the leader in all those dimensions I mentioned.

Andy Jassy: I think that, you know, one other thing I would say about that is that in the business today, as I mentioned, it's a 105 billion dollar revenue run rate business. About 90% of the global IT spend is still on premises, and if you believe that equation is going to flip, which I do, there's a lot of growth ahead of us in AWS as the leader in all those dimensions I mentioned. But I also think that generative AI itself, and AI as a whole, it's going to be really large. I mean, it is not something that we originally factored when we were thinking about how large AWS could be.

Speaker Change: The business today, as I mentioned, it's a $105 billion revenue run rate business.

Andy Jassy: About 90%

Andy Jassy: But I also think that generative AI itself and AI as a whole It's going to be really large. I mean, it is not something that we originally factored when we were thinking about how large AWS could be. And unlike the non-AI space, where you're basically taking all this infrastructure that's been built on premises over a long period of time and working with customers to help them migrate it to the cloud, which is a lot of work, by the way, in the generative AI space, it's going to get big fast, and it's largely all going to be built from the get-go in the cloud, which allows the opportunity for those businesses to continue to grow.

Andy Jassy: It's going to be really large. I mean, it is not something that we originally factored when we were thinking about how large AWS could be.

Andy Jassy: And unlike the non-AI space, where you're basically taking all this infrastructure that's been built on premises over a long period of time, and working with customers to help them migrate into the cloud, which is a lot of work by the... Way. In the gender of AI space, it's going to get big fast, and it's largely all going to be built from the get go in the cloud, which allows the opportunity for those businesses to continue to grow.

Andy Jassy: And unlike the non-AI space, where you're basically taking all this infrastructure that's been built on premises over a long period of time and working with customers to help them migrate it to the cloud, which is a lot of work, by the way,

Andy Jassy: In the generative AI space, it's going to get big fast, and it's largely all going to be built from the get-go in the cloud, which allows the opportunity for those businesses to continue to grow. On the pharmacy side,

Andy Jassy: On the pharmacy side, I think you're right that you're seeing that business continue to grow and to get more resonance with customers, and, you know, I think it was always a relatively natural extension for us to build a pharmacy offering from our retail business, but I think a lot of what you see in the business has grown really quickly, and a lot of what you've seen is that the work that the team has done on the customer experience over the last 18 months has really

Andy Jassy: On the pharmacy side, I think you're right that you're seeing that business continue to grow and to get more residents with customers. And, you know, I think it was always a relatively natural extension for us to build a pharmacy offering from our retail business. But I think a lot of what you see in the business has grown really quickly. A lot of what you've seen is that the work that the team has done in the customer experience over the last 18 months has really paid off. Customers love the customer experience of Amazon Pharmacy. And, you know, we, you know, especially by the way, when you think about the experience and the speed and ease with which you can order versus walking into a pharmacy in a physical store.

Speaker Change: I think you're right that you're seeing

Andy Jassy: that business continue to grow and to get more residents with customers and

Andy Jassy: You know, I think it was always a relatively natural extension for us to build a pharmacy offering from our retail business.

Andy Jassy: But I think a lot of what you see, and the business has grown really quickly, a lot of what you've seen is that the work that the team has done on the customer experience over the last 18 months has really paid off. Customers love the customer experience of Amazon Pharmacy.

Andy Jassy: Customers love the customer experience of Amazon Pharmacy and, you know, we especially love it when you think about the experience and the speed and ease with which you can order versus walking into a pharmacy in a physical store. If you walk into pharmacies in cities today, it's a pretty tough experience with how much is locked behind cabinets where you have to, you know, press a button to get somebody to come out and open the cabinets for you and a lot of So the combination of what's happening in the physical world and how much we've improved our pharmacy experience is driving a lot of customer resonance and buying behavior.

Andy: And, you know, we, you know, especially, by the way, when you think about the experience and the speed and ease with which you can order versus walking into a pharmacy in a physical store, if you walk into pharmacies and

Andy Jassy: If you walk into pharmacies in cities today, it's a pretty tough experience with how much is locked behind cabinets where you have to press a button to get somebody to come out and open the cabinets for you, and a lot of shoplifting going on in the store.

Andy Jassy: In cities today, it's a pretty tough experience with how much is locked behind cabinets where you have to press a button to get somebody to come out and open the cabinets for you.

Andy Jassy: So the combination of what's happening in the physical world and how much improved we've made our pharmacy experience is driving a lot of customer residents and buying behavior. I think also you see us continuing to expand there. We expanded our expass package and program to Medicare members. Net program, you know, allows customers and members to be prime members to be able to get up to 60 common medications for just $5 a month. And we continue to launch same-day delivery of medications to cities. We have, we have an eight cities, including Los Angeles and New York today, with plans to expand to more than a dozen cities by the end of the year.

Andy Jassy: A lot of shoplifting going on in the stores. So the combination of what's happening in the physical world.

Andy Jassy: and how much improved we've made our pharmacy experience is driving a lot of customer resonance and buying behavior. I think also you see us continuing to expand there. We expanded our RxPass package.

Andy Jassy: I think you also see us continuing to expand there. We expanded our X-Pass package and program to Medicare members, and that program, you know, allows customers and members to be prime members to be able to get up to 60 common medications for just $5 a month. And we continue to launch same-day delivery of medications to cities. We have them in eight cities, including Los Angeles and New York today, with plans to expand to more than a dozen cities by the end of the year.

Andy Jassy: and program to Medicare members and that program allows customers and members to be prime members to be able to get up to 60 common medications for just $5 a month.

Andy Jassy: and we continue to launch same-day delivery of medications to cities. We have them in eight cities including Los Angeles and New York today with plans to expand to more than a dozen cities by the end of the year. So we're seeing a lot of growth there and we're very optimistic about it.

Andy Jassy: So we're seeing a lot of growth there, and we're very optimistic about it.

Andy Jassy: So we're seeing a lot of growth there, and we're very optimistic about it. Our next question comes from the line of Brent Thill with Jeffries. Please proceed with your question. On the EWS, I'm curious if you had a backlog number you could share.

Brent Phil: Our next question comes from the line of Brent Phil with Jeffries. Please proceed with your question.

Operator: Our next question comes from the line of Brent Thill with Jeffries. Please proceed with your question.

Speaker Change: Our next question comes from the line of Brent Thill with Jeffries. Please proceed with your question.

Brent Phil: On the AWS, I'm curious if you had a backlog number you could share for the quarter. And I guess Andy, when you think about getting the data state ready, I know AI today is early, but when you see most of these companies are having to move the public cloud, are you seeing a step up and return to work with moving to get ready for this day to stay even though even if they're not ready to adopt AI. What are you seeing in those sales motions? Thank you.

Brent Thill: On AWS, I'm curious if you had a backlog number you could share for the quarter, and I guess, Andy, when you think about

Brent Thill: Getting the data state ready. I know AI today is early, but when you see most of these companies are having to move to public cloud, are you seeing a step up and a return to workloads moving to get ready for this data state, even if they're not ready to adopt AI? What are you seeing in those sales motions? Thank you.

Dave Fildes: Okay, this is Dave. I'll just start off just to give you the backlog figure. So at the end of the second quarter, it was $156.6 billion. So that's up about 19% year over year.

Dave Fildes: Hey, this is Dave. I'll just start off by giving you the backlog figure. So at the end of the second quarter, it was $156.6 billion. So that's up about 19% year over year.

Andy: Hey, this is Dave. I'll just start off just to give you the backlog figure. So at the end of the second quarter, it was $156.6 billion. So that's up about 19% year over year.

Ryan Olsavsky: On the second part of your question, Brent, what I would say is that it's true in analytics, but it's even maybe more so true in AI, which is that it's quite difficult to be able to do AI effectively. If your data is not organized in such a way that you can access that data and run the models on top of them and then build the application. So when we work with customers, and this is true both when we work directly with customers as well as when we work with systems integrator partners.

Andy Jassy: On the second part of your question, Brent, what I would say is that it's true in analytics, but it's even maybe more so true in AI, which is that it's quite difficult to be able to do AI effectively if your data is not organized in such a way that you can access that data and run the models on top of them and then build the application. So when we work with customers, and this is true both when we work directly with customers as well as when we work with systems integrator partners, everyone's in a hurry to get going on doing generative AI, and one of the first questions that we ask is, you know, show us where your data is, show us what your data lake looks like, show us how you're going to access that data.

Andy Jassy: On the second part of your question, Brent, what I would say is that

Speaker Change: It's true in analytics, but it's even maybe more so true in AI, which is that it's quite difficult.

Andy Jassy: To be able to do AI effectively, if your data is not organized in such a way that you can access that data and run the models on top of them and then build the application. So, when we work with customers, and this is true both when we work directly with customers as well as when we work with systems integrator partners,

Ryan Olsavsky: Everyone's in a hurry to get going on doing generative AI, and one of the first questions that we ask is, "Show us where your data is, show us what your database looks like, show us how you're going to access that data." And there's very often work associated with getting your data in the right shape and in the right spot to be able to do generative AI. Fortunately, because so many companies have done the work to move to the cloud, there's a number of companies who are ready to take advantage of AI.

Andy Jassy: Everyone's in a hurry to get going on doing generative AI, and one of the first questions that we ask is, you know, show us where your data is, show us what your data lake looks like, show us how you're going to access that data,

Andy Jassy: And there's a lot of work associated with getting your data in the right shape and in the right spot to be able to do generative AI. Fortunately, because so many companies have done the work to move to the cloud, there are a number of companies who are ready to take advantage of AI, and that's where we've seen a lot of growth. But also, it's worth remembering that, you know, again, 90% of the global IT spend is being on-premises.

Speaker Change: And there's very often work associated with getting your data in the right shape and in the right spot to be able to do generative AI.

Andy Jassy: There are, fortunately, because so many companies have done.

Andy Jassy: The work to move to the cloud, there's a number of companies who are ready to take advantage of AI, and that's where we've seen a lot of the growth, but also it's worth remembering that

Ryan Olsavsky: And that's where we've seen a lot of the growth, but also it's worth remembering that, again, remember the 90% of the global IT spend being on premises. There are a lot of companies who have yet to move to a cloud, who will, and the ability to use AI more effectively is going to be one of the many drivers in doing so.

Andy Jassy: You know, again, remember the 90% of the global IT spend being on-premises, there are a lot of companies who have yet to move to the cloud who will, and the ability to use AI more effectively is going to be one of the many drivers in doing so for them.

Andy Jassy: There are a lot of companies who have yet to move to the cloud who will, and the ability to use AI more effectively is going to be one of the many drivers for doing so for them.

Operator: for them.

John Blackledge: And the next question comes from the line of John Blackledge with Keegan Coward. Please proceed with your question. Great. Two questions. First, the AWS app, income margins were strong again, mid 30% area. Just kind of what were the key drivers and how do we think about AWS margins in the back half of the year.

Operator: And the next question comes from the line of John Blackledge with TD Coward. Please proceed with your question.

Operator: And the next question comes from the line of John Blackledge with TD Coward. Please proceed with your question. Great, two questions.

Speaker Change: And the next question comes from the line of John Blackledge with TD Calvert. Please proceed with your question.

John Blackledge: Great. Two questions. First...

Speaker Change: The AWS app.

Speaker Change: Income margins were strong again.

John Blackledge: mid 30 percent area just kind of what were the key drivers

John Blackledge: And then the international up income margin stepped down a bit, Q over Q, just curious about that.

John Blackledge: And how should we think about AWS margins in the back half of the year? And then the international income margin stepped down a bit. Q over Q, just curious about that. Thank you.

Ryan Olsavsky: Thank you. Yes, thank you, John.

Brian Olsavsky: Yes, John. Let me start with AWS profitability. So yes, the margin is in the mid-30s percent range in Q2. It's up from the mid 20% range last year. So you're seeing the impact of a number of cost reductions that we've made and efficiencies we've driven in the business. There's also an adjustment that we made to the useful life of servers that happened in Q1.

Ryan Olsavsky: Let me start with AWS profitability. So yes, the margin is in the mid 30% range in Q2. It's up from the mid 20% range last year. So you're seeing the impact of the number of cost reductions that we've made and efficiencies we've driven in business. There's also an adjustment that we made to the useful life of servers that happened in Q1. We talked about last quarter, that contributed about 200 basis points of margin year every year. So continue to work on the cost structure. But again, as we said in the past, these operating margins will fluctuate a bit lumpy quarter to quarter.

Brian Olsavsky: Yes, thank you, John . Let me start with AWS profitability.

Brian Olsavsky: Yes the margin is in the mid 30s percent range in Q2. It's up from the mid 20% range last year. So you're seeing the impact of a number of

Brian Olsavsky: We talked about last quarter that contributed about 200 basis points of margin year over year. So we continue to work on the cost structure. But again, as we said in the past, operating margin will fluctuate and be lumpy quarter to quarter. We continue to work to build new products that attract new customers and work on efficiencies. The second question was... International.

Brian Olsavsky: There's also an adjustment that we made to the useful life of servers that happened in Q1. We talked about last quarter. That contributed about 200 basis points of margin year over year.

Andy: So, we continue to work on the cost structure, but again, as we've said in the past, the operating margin will

Ryan Olsavsky: We continue to work to build new products that track new customers and work on our efficiencies.

Speaker Change: fluctuated a bit lumpy quarter to quarter. We continue to work to build new products that attract new customers and work on our efficiencies.

Ryan Olsavsky: Second question was international segment margin.

Dave Fildes: International Segment March. This is Dave.

Dave Fildes: Just real quick on that. You mentioned we're at about $300 million profit for the quarter. That is up about 390 basis points year-on-year from a margin perspective. As we talked about in the past, there are a number of countries at different stages of existence and maturity there. I think you're seeing continued progress certainly on a year-over-year basis with both our established countries, so the UK, Germany, and Japan, in particular, being sizable contributors to that business, continued improvement and build-out there, similar to the factors we talked about with the U.S., focused on operational efficiency while expanding the customer experience.

Ryan Olsavsky: Yeah, just a day of just real quick on that. You mentioned where about $300 million profit for the quarter. That is up about 390 basis points year on year from a margin perspective.

Speaker Change: Second question was? International segment margin.

Dave Fildes: Yeah, this is Dave. Just real quick on that. You mentioned we're at about $300 million profit for the core, that is.

Dave Fildes: up about 390 basis points year-on-year from a margin perspective and as we talked about in the past there's you know a number of countries at different stages of you know existence and maturity there and so I think you know you're seeing continued progress certainly on a year-over-year basis.

Ryan Olsavsky: And as we talked about in the past, there's a number of countries at different stages of existence and maturity there. And so I think you're seeing continued progress, certainly on a year-over-year basis, with both our established countries. So the UK, Germany, and Japan in particular being sizable contributors to that business continued improvement and build out there. Similar to the fact as we talked about with the U.S.

Dave Fildes: With both our established countries, so the UK, Germany, and Japan, in particular, being, you know, sizable contributors to that business, continued improvement and build out there, similar to the factors we talked about with the U.S.,

Ryan Olsavsky: focused on operational efficiency while expanding the customer experience. And in the emerging countries, as we've said in over the past several quarters, we launched about 10 countries over the last seven years, really focused on expanding that customer experience, building out the Prime member benefits while building scalable solutions for customers. And so I think in both that established in emerging areas, seeing good progress year over year and working for further improvement there.

Dave Fildes: In the emerging countries, as we've said over the past several quarters, we launched about 10 countries over the last seven years, really focused on expanding that customer experience, building out the prime member benefits while building scalable solutions for customers. I think in both established and emerging areas, we are seeing good progress year-over-year and working for further improvement there.

Dave Fildes: focused on operational efficiency.

Dave Fildes: while expanding the customer experience. And in emerging countries, as we've said, you know, over the past several quarters,

Dave Fildes: We launched about 10 countries over the last seven years.

Dave Fildes: We're really focused on, again, expanding that customer experience, building out the prime member benefits while building scalable solutions for customers. And so I think in both that established and emerging areas, seeing good progress year over year and working for further improvement there.

Doug Ameth: And now our final question will come from the line of Doug Ameth with JP Morgan. Please proceed with your question. Thanks for taking the questions. You factored in some macro and discretionary pressures into your 2Q guide, especially in Europe. And I think you called out computers, electronic, and maybe TVs and 2Q as well.

Operator: And our final question will come from the line of Doug Anmuth with JPMorgan. Please proceed with your question.

Operator: And our final question will come from the line of Doug Anmuth with JPMorgan. Please proceed with your question.

Doug Anmuth: Thanks for taking the questions. You've factored in some macro and discretionary pressures into your 2Q guide, especially in Europe, and I think you called out computers, electronics, and maybe TVs in 2Q as well. I'm just curious, were the macro trends generally as you expected, or did you see softening through the quarter, and kind of how does that influence your 3Q outlook? And then separately, Bryan, can you help us quantify the incremental investment around Kuiper that you talked about? Thanks.

Speaker Change: Thanks for taking the questions.

Doug Anmuth: You factored in some macro and discretionary pressures into your 2Q guide, especially in Europe , and I think you called out computers, electronics, and maybe TVs in 2Q as well. I'm just curious, were the macro trends generally as you expected, or did you see softening through the quarter, and kind of how does that influence your 3Q?

Doug Ameth: I'm just curious where the macro trends generally as you expected, or did you see softening through the quarter, and kind of how does that influence your 3Q outlook. And then separately, Brian, can you help us quantify the incremental investment around Kuiper that you talked about? Thanks.

Brian: Outlook, and then separately, Brian , can you help us quantify the incremental investment around Kuiper that you talked about? Thanks.

Brian Olsavsky: Yes, sure, thank you, Doug. The macro fact is that if I step back to Gandhi, discuss it earlier as well, we're seeing a lot of the same consumer trends that we have been talking about for the last year. Consumers being careful with their spend, trading down, looking for low ASP products, looking for deals. That continued into Q2, and we expected to continue into Q3. We're seeing signs of it continuing Q3.

Brian Olsavsky: Yeah, sure. Thank you, Doug.

Brian Olsavsky: The macro factors, you know, if I step back to, again, you discussed it earlier as well, we're seeing a lot of the same consumer trends that we have been talking about for the last year. Consumers being careful with their spend, trading down, looking for lower AST products, looking for deals. That continued into Q2, and we expect it to continue into Q3. We're seeing signs of it continuing into Q3. The difference in Q2 was that, again, we had very strong unit volume growth.

Doug Anmuth: Sure. Thank you, Doug.

Brian Olsavsky: The macro factors, you know, if I step back to, again, you discussed it earlier as well, we're seeing a lot of the same consumer trends that we have been talking about for the last year.

Brian Olsavsky: Consumers being careful with their spend, trading down, looking for lower ASP products, looking for deals.

Brian Olsavsky: That continued into Q2, and we expect it to continue into Q3. We're seeing signs of it continuing Q3.

Brian Olsavsky: The difference in Q2 was that, again, we had very strong unit volume growth. We actually slightly accelerated when you just for leap year in North America's unit growth in Q2. So the drop in revenue sequentially, revenue growth sequentially was tied to ASP and both continuation of existing trends but also, as we talked about, growth in our everyday essentials business and categories. So, while we think we are selling a number of higher ticket items, certainly in the market itself, certainly not as strong as it's been in a normalized economy.

Brian Olsavsky: We actually slightly accelerated when you're just for the leap year in North America's unit growth in Q2. So the drop in revenue sequentially, revenue growth sequentially was tied to ASP and both a continuation of existing trends, but also, as we talked about, growth in our everyday essentials business and categories. So, while we think, you know, we are selling a number of higher-ticket items, certainly, and holding up well in the market itself, certainly not as strong as it's been in a normalized economy.

Brian Olsavsky: The difference in Q2 was that, again, we had very strong unit volume growth. We actually slightly accelerated when you're just for leap year in North America, unit growth in Q2. So the...

Brian Olsavsky: drop in revenue sequentially, revenue growth sequentially was tied to ASP and both continuation of existing trends, but also, as we talked about, growth in our everyday essentials business and categories. So while we think

Brian Olsavsky: We are selling a number of higher ticket items, certainly in holding up well.

Brian Olsavsky: And so lower ASP products are more of the mix right now. And we like that because, again, our speed allows us to deliver, especially everyday essentials, quickly. And we like being in the consideration set for consumers on those items. We're not going to quantify Kuiper today, but thank you for your question.

Brian Olsavsky: in the market itself, certainly not as strong as it's been in a normalized economy. And

Brian Olsavsky: So it's low ASP products are more than next right now, and we like that because again our speed allows us to deliver especially everyday essentials quickly. We like to be in the consideration set for consumers on those items. We're not going to quantify Kuiper today, but thank you for your question.

Brian Olsavsky: So lower ASP products are more of the mix right now, and we like that because, again, our speed allows us to deliver especially everyday essentials quickly, and we like being in the consideration set for consumers on those items.

Brian Olsavsky: We're not going to quantify Kuiper today, but thank you for your question.

Operator: And 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 look forward to talking with you again next quarter.

Operator: And 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 look forward to talking with you again next quarter.

Operator: [inaudible]

Operator: And 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 look forward to talking with you again next quarter.

Operator: [inaudible]