Amazon Q2 2023 Earnings: AWS Passes Cost Optimization Inflection Point and Accelerates Into Growth
AWS 12% y/y growth in a customer cost optimization mode… on top of a $80B business. Just think about this and what will happen when the economy accelerates.
What Key Areas Positions Amazon to Excel in the Broader AI Landscape?
It’s safe to say at this point that Amazon is a Cloud infrastructure company that happens to have a retail business. I do believe that Amazon is well-positioned to win in the broader AI landscape, particularly in levels where other companies cannot compete. The company views AI as a three-layered business.
A: Compute infrastructure (where they are already on second-generation custom silicon): to train models, generate inferences, etc.
B: LLMs As a Service
Takes billions and multiple years to build models. Most customers just want to access a large standard model, with their customization, without leaking proprietary data == Bedrock setup to do that today. Amazon has its own LLM Titan also, in addition to Anthropic, StabilityAI, Cohere, etc.
C: Applications. Most hype is focused here (ChatGPT is here), but it may not be where most of the money is made.
Amazon Code Whisperer is in here and is interesting.
Core of AI is data and Amazon has more data/storage than anyone on the planet.
(I think a lot of people forget this). People will want to bring models to the data, not the other way around.
What Notable Developments Are Occurring in Amazon's Stores and Retail Business?
Doubling same-day facilities is a big initiative. Cheap to add, improve purchase frequency, and lowers cost. Each same-day facility can hold 100k SKUs, and be injected same-day from nearby facilities up to a few million SKUs.
4x higher same-day volume compared to 2019.
Answered critics by saying they are far from diminishing returns.
I believe that network regionalization will be the best decision they make in the next decade in this business.
Buy With Prime got a mention. 10x increase in daily orders on Prime Day.
Advertising Revenue up 22% y/y
3P Unit Mix at highest level 60%
5 consecutive quarter of operating margin improvements, 3.9% second quarter operating margin
Still not sure if they will find a Stores model. They are experimenting in two markets right now: Illinois and Southern California. Won’t scale until they see results. Tick tock.
Amazon Business $30B and still early in the opportunity.
Source: RepublicWorld
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