Amazon (AMZN) – Earnings Review – February 2, 2024

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Amazon (AMZN) – Earnings Review – February 2, 2024


  • Beat revenue estimate by 2.2% & beat guide by 4.0%.
  • Met AWS revenue estimates.
  • Beat ad revenue estimates by 3.2%.
  • North American (UCAN) and International revenue were also both ahead of expectations.

Source: Brad Freeman – SEC Filings, Company Presentations, and Company Press Releases


  • Beat EBIT estimates by 26% and beat its EBIT guidance by 46%.
  • Beat AWS EBIT estimate by 7.8%.
  • Beat operating cash flow (OCF) estimates by 0.7%.
  • Beat $0.80 GAAP earnings per share (EPS) estimates by $0.20.

Source: Brad Freeman – SEC Filings, Company Presentations, and Company Press Releases

Balance Sheet

  • $86 billion in cash & equivalents.
  • $58 billion in debt.
  • Share count rose 1% Y/Y.

CFO Brian Olsavsky was asked about buybacks on the call. He flirted with the idea of entertaining them, but added that Amazon has many more investments to focus on in the years ahead.

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Guidance & Valuation

  • Missed Q1 revenue estimate by 0.9%.
  • Beat Q1 EBIT estimate by 11%. Like Meta and Google have already done, Amazon extended the useful life of some assets from 5 to 6 years. This lowered depreciation expense and helped EBIT. Without this help (which shouldn’t be excluded but I will for context) it beat EBIT estimates by 1%.

Amazon trades for 39x 2024 EBIT, 25x FCF and 45x 2024 EPS. EBIT is set to compound at a 3 year clip of 34%. FCF is set to compound at a 3 year clip of 30%. EPS is set to compound at a 3 year clip of roughly 34% as well.

Call & Release Highlights

Fulfillment Overhaul and Margin Expansion Work:

Amazon’s aforementioned regional fulfillment overhaul is going even better than expected. It’s creating outperforming benefits in miles to fulfill and touches per fulfillment. This has been paramount in Amazon lowering per unit cost to serve in 2023 for the first time in 5 years. Specifically, it fell by a brisk $0.45 per package in the USA. This matters a lot when a revenue base is as massive as Amazon’s is. As an added positive byproduct, this is shrinking industry-leading delivery times further and making Amazon a larger player in daily essentials. It’s leaning into this reality as it added 65 new same day delivery sites Y/Y. If you can get me a toothbrush or an onion in an hour, I don’t need to go to CVS or Publix. While progress has been impressive, they’re not done… not even close. When pairing that with macro factors like labor supply recovering (lower wage inflation) and transportation disinflation, we’re left with Amazon’s exploding North American (UCAN) EBIT margin. Just 3 quarters ago, Jassy had to convince analysts that UCAN EBIT margin could get back to 4%. It’s now nearing 8% with more upside to come per the team.

“We can keep doing better on the cost to serve… the improvement in margins is not capped.” – CEO Andy Jassy

This overhaul has been the key source of marketplace and fulfillment margin expansion, but it has many more levers to pull. 3rd party sellers setting a new record of 61% of marketplace sales is margin accretive as Y/Y growth accelerated from 18% to 19% this quarter. Sponsored listing growth is margin accretive; better utilizing excess capacity via Supply Chain by Amazon (SCA) and Buy with Prime (BwP) is margin accretive; improving inbound inventory algorithms to better place goods is margin accretive; All of these additional tailwinds continue to play out. It doubled the size of its already massive logistics network in a very short period of time. Now, it’s reviewing this rapid expansion and, line by line, optimizing cost.

  • Buy with Prime added 24/7 live chat support, box free returns, and live order tracking (all managed by Amazon) for participating merchants. Buy with Prime is its white label fulfillment service allowing merchants to offer its world-class network from their own sites.
  • Debuted SCA in China for its large seller base there.

For years and years, Amazon famously punted profitability to future periods. Macro turned on a dime in 2022 to force companies to show near term profitability. Amazon pivoted admirably. This is the result.

AWS Demand Trends & Cloud Demand Appetite:

AWS growth accelerated a bit from last quarter. Encouragingly, leadership told us on the call that the acceleration would “continue into 2024.” Like last quarter, Jassy again told us that “cloud optimization trends continued to attenuate.” Less optimization means more new migration and workload demand and so accelerating growth… hence the expectations for 2024. It accelerated the pace of large deal signings, shrank the sales cycle and is renewing existing client contracts with healthy net revenue expansion. All of this is wonderful news for Amazon and for countless cloud players like Snowflake, CrowdStrike, Zscaler etc.

AWS added $1.1 billion in revenue sequentially, which is the largest gain for any of the three cloud providers. It’s not giving up market share to Azure or anyone else. Notable wins and customer expansions during the quarter included Amgen (expansion), Salesforce (expansion) Mitsubishi, Nvidia, LG, Hyundai, Merck and Byd. 

  • Mitsubishi used Amazon QuickSight to drive tech stack maintenance costs down by a wild 70%. QuickSight is Amazon’s business intelligence tool to leverage 1st party data to guide decision making. 
  • Amazon SageMaker is another important AWS tool that was highlighted this quarter.  It’s Amazon’s fully managed service for building, training and deploying AI models. With it, Amazon reduced foundational model deployment costs by 50% and model latency by 20%.
  • New AWS European Sovereign Cloud to give public sector clients the ability to more seamlessly meet uniquely strict regulation.
  • AWS now has 105 availability zones and will soon add 12 more via recently announced investments in places like Mississippi.
  • To help AWS customers control cost, Amazon debuted new “Capacity Blocks” for ML. This allows customers to use exactly as many GPUs as they’ll need over shorter periods of time to bolster flexibility and to minimize waste.


I wanted to frame this section by reviewing the 3 layers of GenAI products and Amazon’s updates within each of them.

Layer one encompasses algorithm training and inference. It’s where Amazon’s internal chipsets and a partnership with Nvidia come into play. Graviton chip is its CPU product designed for basic computing. It debuted the 4th generation of this chip during the quarter which boasts 30% better performance than the predecessor. It also released the latest version of its Trainium chipset (intuitively named based on its role to train GenAI models). This quadruples machine learning training speed vs the old model. Airbnb and Hugging Face are among the users of these chips early on. It also expanded collaboration efforts with Nvidia to “deliver the most advanced infrastructure, services and software to power GenAI innovation.” It will be the first public cloud player to get its hands on Nvidia’s latest Grace Hopper Superchips. The two are also working together to design the “world’s fastest” supercomputer to be hosted by AWS. It will be a healthy mix of 1st and 3rd party chips powering Amazon’s GenAI ambitions.

Model creation as a service is the second layer where Amazon’s foundational Bedrock model is vital. Bedrock allows developers to build custom use cases on top of it while offering a plethora of 3rd party models such as Meta’s Llama 2. Per Jassy, GenAI is in a rapid experimentation phase at the moment. Considering how new this field is, developers are actively toying with different models to see which work the best for what they need. Bedrock’s large partner integration roster allows these developers to freely move between model templates in a safe, secure, fully-managed cloud environment. This quarter, AWS and Salesforce expanded their collaboration to add support for Bedrock in Salesforce’s ecosystem. Salesforce is adding more AWS products as part of the news. 

All in all, Bedrock now has “thousands of customers” and is “deeply resonating” with customers. Per Jassy, clients want their GenAI work to be done in the same cloud environment they’re learned and have grown to trust over years and years. They want the cloud provider with the “best security track record.” That’s what Bedrock hosted by AWS provides. This is a large piece of Jassy seeing tens of billions in GenAI revenue in the coming years. That’s exciting to think about. Bedrock added new products like multi-step task agents and model fine-tuning during the quarter as it added Cohere’s and Anthropic’s latest models among others to bolster choice.

The third layer is the consumer app layer. This week, it debuted “Rufus” as its marketplace shopping companion. This allows shoppers to ask questions like “which football has the best grip” with detailed explanations taking you to the best option. It’s trained on Amazon’s 40% share of U.S. ecommerce and commanding global commerce share, which is something smaller competition just can’t possibly match. Codewhisperer, which is used by Adidas and BMW among many others,  was among its first apps here which is a general coding companion for developers. More recently, it debuted Q. Q is another coding companion, but is trained specifically for AWS to “write, test and translate code” with access to AWS’s wide range of data repositories. Many more consumer GenAI apps are coming.


Prime Video will debut advertising throughout 2024. This is giving Jassy “increasing conviction” that Prime Video can turn into a profit driver on its own. Thursday Night Football (TNF) will be a material piece of this. Amazon enjoyed a whopping 24% Y/Y increase in TNF viewers and is licking its chops and the potential to add more sports (like with its Diamond Sports investment during the quarter) to bolster Prime Video’s appeal and ad impressions. It’s fine tuning measurement, identification and targeting capabilities to capitalize on this momentum. It’s also using its work in GenAI to automate campaign creation (like Google and Meta). Ad revenue rose 26% Y/Y on an FX neutral basis as growth continues to accelerate on a larger and larger base. It’s the fastest rate of growth in over a year. There is much more ad load increasing to be done here.


Consumer motivation to deal hunt remained very elevated this quarter with inflationary concerns still in place. It delivered a 70% Y/Y increase in cumulative savings during Black Friday – Cyber Monday to cater to these needs.

Other Bets:

  • Kuiper successfully launched two satellite prototypes (for broadband internet) and validated all systems. It will launch more throughout 2024 as part of ongoing beta testing.
  • Tweaks and consolidation within the grocery business is leading to a “nice profit trajectory.”
    • Added new 3rd party grocery delivery partners.
  • As previously covered, it partnered with One Medical to deepen virtual care services as part of its push into healthcare.


This was a fantastic quarter. AWS is accelerating; ads are proliferating; fulfillment margin levers are all working; margins are exploding. There is nothing to pick at in this report. The thesis has come fully to fruition, and I have no plans to sell any shares following the after-hours pop. I expect sell-side profit estimates to keep soaring as cloud demand recovers and it proves to the world exactly how profitable fulfillment can be – especially with the international profit drag now gone. Wonderful quarter. Wonderful team. Wonderful company. Simple, wonderful.

Disclaimer: Third party content is provided for informational purposes only and should not be construed as an offer to sell or a solicitation of an offer to buy or sell any security. Third party content is not intended to serve as a recommendation to buy or sell any security and is not intended to serve as investment advice. Third party content creators are not affiliated with BBAE Holdings LLC, (“BBAE”) Redbridge Securities LLC (“Redbridge Securities”) or BBAE Advisors LLC (“BBAE Advisors”). All investments involve risk, including the possibility of total loss of principal. For additional important information, please click here.

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