Amazon Q1 2024 Earnings: Big Revenue Growth, Bigger Profit Growth

UPS/FedEx - did you catch the license plate of that big orange truck that hit you? Who else is exceeding top end of revenue projections? I hope Fred Smith is enjoying retirement.

Amazon knocked their quarter out of the park, particularly from an operating income/free cash flow point of view — thanks to the trinity of Fulfillment Regionalization, AWS, and 3P. No mention of exactly how much more juice is left to squeeze from fulfillment, but my number would be 30% if I had to pin a number on it (which Jassy did not). Already investing a few years, and a few more years to go— but the nature of optimization is the last few percentages are harder.

Amazon’s Q1 Results

* $143B revenue up 13% y/y. Some of best growth in this market. $15B in operating income.

* $48B in TTM FCF, up $53.2B y/y. This was the 🎤moment.

* NA segment sales increased 12% y/y to $86 B with operating income of $5B (up from $0.9B Q1 2023). Intl up 11% to $31.9B.

* 3P services revenue up 16% y/y to $34B, putting them on a ~$162B run-rate for this 2024.

* Advertising sales up 24% y/y, mostly sponsored products, up to $11.8B, putting them on a ~$58B run-rate for 2024.

* AWS up 17% y/y, now a $100B run-rate business. Margins increased 800bps from Q4.

* INTL established markets got to profitability. Emerging markets still developing.

IAmazon’s TTM Free Cash graph below dunks on its “never profitable” detractors. Take that.

* Regionalization helping increase units per box, improving density.

Q2 Predictions

* 7-11% growth (historically slower season, unfavorable FX)

Amazon’s Investment Cycles

Amazon over its history goes through investment and harvest cycles. Sometimes they sync up, sometimes they don’t. Capex was $48.4B last year, and will be higher this year: AI. Capex already $14B in Q1, that run-rate would put them 15+% over 2023.

In next years, Amazon is in an optimization cycle with continued network improvements, further improving free cash flow.

AWS compute/storage is in a harvest cycle. AWS AI in a large investment cycle.

Amazon is going to keep investing in a few areas: nationwide grocery and AI. There is little risk that Amazon will underinvest in AI. Jassy described it like Cloud Computing or the Internet. Amazon noted that all new AI projects will be built on cloud, which could be a generational event for moving the 85% of worldwide compute from on-premise to cloud also — a double-opportunity for Amazon. (Sorry investors)

Don’t expect a large grocery rollout this year; even though Andy mentioned nationwide retail and perishables were critical. If it were me, think of this year as pilot phase of the new Tony Hoggett grocery regime. If early signs are good, the next phase of investment will also be small.

Also, did anyone watch Road House? Not a hit. The only thing I disagreed with on the call. I have seen Patrick Swayze, and Jake Gylenhaal, you are no Swayze.