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Amazon Projects AWS Growth Above 40% in 2027 and 2028, Calls $1 Trillion Cloud Business Plausible
CEO Andy Jassy said the cloud unit has strong visibility into customer demand, as Amazon reported record 13.9% operating margin and guided to fourth-quarter sales of $240 billion to $247 billion.
Amazon.com Inc. said Amazon Web Services is projected to grow more than 40% year over year in each of 2027 and 2028, with CEO Andy Jassy saying it is "not a stretch" to imagine the unit becoming a business of over $1 trillion in annual revenue within five to 10 years. Jassy made the comments on the company's third-quarter earnings call, where Amazon reported worldwide revenue of $201.9 billion, up 12%, and operating income of $28.1 billion, an operating margin of 13.9% that Chief Financial Officer Brian Olsavsky said was the company's highest ever.
AWS growth, chips and capacity
AWS revenue grew 39.3% to $46 billion, which Jassy called the unit's fastest growth in about five to six years and its latest in a run of consecutive quarterly accelerations. The business now has an annualized revenue run rate of $184 billion and added $3.8 billion in revenue from the prior quarter. AWS operating income was $17.8 billion, a 38.7% margin. AI revenue is growing at triple digits year over year, Olsavsky said.
Jassy said the largest blocks of capacity, "the hundreds of megawatts or sometimes up to a gigawatt," are reserved well in advance, giving AWS "very good visibility" into 2027 and 2028 and some of 2029. He said the majority of Bedrock, AWS's service offering multiple AI models, now runs on Amazon's own Trainium chips, and that Amazon will begin selling chips to outside customers in late 2027. Jassy said Bedrock "could be a service as large as" EC2, one of the largest AWS services today.
Olsavsky said the outsized growth of AI puts pressure on overall AWS margins because AI margins are lower than those of core services, and he cited component pricing as another headwind. Amazon does not guide on AWS margins.
Spending and fourth-quarter outlook
Cash capital expenditures were $75.9 billion in the quarter, primarily for AWS and AI. Asked about the capex required to sustain 40% growth, Jassy called it "a once in a lifetime opportunity" and said Amazon can fund the plan. He said it "will forever change the size of amazon."
For the fourth quarter, Amazon guided to net sales of $240 billion to $247 billion and operating income of $28.5 billion to $33.5 billion. Olsavsky said the guidance reflects Amazon Leo satellite service costs: the company now expects to begin capitalizing certain Leo costs in the first quarter of next year, later than he had earlier predicted, so it will continue expensing most Leo-related costs in the fourth quarter. Leo remains on track to begin initial service this year. Olsavsky also said fuel and line haul inflation will be higher in the fourth quarter than in the third.
Retail, advertising and robotics
North America revenue rose 6% to $112.9 billion with an operating margin of 7.7%; international revenue was $43.1 billion, up 8% excluding foreign exchange, with a 3.7% margin. Prime Day moved into the second quarter for most countries this year, which Olsavsky said would have added about 400 basis points to year-over-year growth had it stayed in the third quarter. Worldwide paid units grew 12%.
Advertising revenue was $19.6 billion, up 12%. Jassy said the Prime Day shift was an 850 basis point sequential headwind to advertising growth, and the company expects year-over-year growth to return to the high teens in the fourth quarter. He said agentic shopping from external AI agents is not meaningfully affecting Amazon Ads. Jassy said Prime Video now has a revenue run rate in the tens of billions of dollars and is profitable on its own.
Jassy said Amazon has more than a million robots in its fulfillment network and expects many repetitive jobs now done by people to be done by robots. Olsavsky said the company doubled its fleet of robotic arms in 2026. Shipping costs rose 11% against 12% unit growth.
Bulletins
AMAZON: ADS REVENUE $19.6 BILLION IN Q3, UP 12% YEAR OVER YEAR
AMAZON: EXPECTS YEAR OVER YEAR ADS GROWTH TO RETURN TO HIGH TEENS IN Q4
AMAZON: PRIME VIDEO REVENUE RUN RATE IN TENS OF BILLIONS OF DOLLARS, NOW PROFITABLE ON ITS OWN
AMAZON: LEO SATELLITE BROADBAND ON TRACK TO BEGIN INITIAL SERVICE THIS YEAR
AMAZON CFO: Q3 REVENUE $201.9 BILLION, UP 12% YEAR OVER YEAR; OPERATING INCOME $28.1 BILLION
AMAZON CFO: Q3 OPERATING MARGIN 13.9%, HIGHEST EVER; NORTH AMERICA REVENUE $112.9 BILLION
AMAZON CFO: INTERNATIONAL REVENUE $43.1 BILLION, UP 8% YOY EX-FX; OPERATING MARGIN 3.7%
AMAZON CFO: AWS REVENUE $46 BILLION IN Q3, GREW 39.3% YEAR OVER YEAR
AMAZON CFO: AWS ANNUALIZED REVENUE RUN RATE $184 BILLION; AWS OPERATING INCOME $17.8 BILLION
AMAZON CFO: AWS OPERATING MARGIN 38.7%; AI REVENUE GROWING TRIPLE DIGITS YEAR OVER YEAR
AMAZON CFO: Q4 OPERATING INCOME SEEN $28.5 BILLION TO $33.5 BILLION
AMAZON CEO: AWS CAPACITY GROWTH PROJECTED OVER 40% YOY IN EACH OF 2027 AND 2028
AMAZON: AWS CAN BE A $1 TRILLION REVENUE BUSINESS IN FIVE TO TEN YEARS, EXEC SAYS
AMAZON EXEC: Q4 FUEL AND LINE HAUL INFLATION HIGHER THAN IN Q3, NO EXACT NUMBER GIVEN
AMAZON CEO: HAS VERY GOOD VISIBILITY INTO AWS 2027, 2028 AND SOME OF 2029 LARGE CAPACITY DEMAND
AMAZON CEO: HAS OVER A MILLION ROBOTS NOW IN ITS FULFILLMENT NETWORK
AMAZON EXEC: NOT GUIDING ON AWS MARGIN; CUSTOM CHIPS TO BE MORE OF COST STRUCTURE OVER TIME
AMAZON EXEC: AI MARGINS LOWER THAN CORE AWS, MIX AND COMPONENT PRICING SEEN AS MARGIN HEADWINDS
AMAZON EXEC: EVERYDAY ESSENTIALS GROWN ABOUT 3X FASTER THAN REST OF STORE, HALF OF UNITS NOW
AMAZON EXEC: SAME-DAY PERISHABLES CUSTOMERS BUY ABOUT 7X MORE EVERYDAY ESSENTIAL UNITS
AMAZON EXEC: GROCERY CUSTOMERS SHOP FOUR TIMES MORE NON-GROCERY CATEGORIES LIKE HOME, APPAREL
AMAZON EXEC: SEES SIX TO EIGHT AI MODELS ABOUT AS GOOD AS EACH OTHER IN NEXT TWO TO THREE YEARS
AMAZON EXEC: BEDROCK OPPORTUNITY 'GIGANTIC', COULD BE A SERVICE AS LARGE AS EC2
AMAZON EXEC: ONLY TWO COMPANIES HAVE BIG CLOUD AND CHIP STRONG ENOUGH TO SELL EXTERNALLY
AMAZON EXEC: TO START SELLING CHIPS EXTERNALLY IN LATE 2027, EXPECTS VERY SIGNIFICANT BUSINESS
AMAZON EXEC: AWS GROWING 39% AT $184 BILLION RUN RATE, SEES 40% GROWTH EACH OF NEXT TWO YEARS
AMAZON EXEC: AI OPPORTUNITY 'ONCE IN A LIFETIME', WILL INVEST TO LEAD; 'WE CAN FUND THIS PLAN'
AMAZON EXEC: MAJORITY OF BEDROCK RUNNING ON TRAINIUM, LIKES PRICE PERFORMANCE AND MARGINS
AMAZON EXEC: NEO CLOUDS ABOUT 3,500 BASIS POINTS WORSE IN OPERATING MARGIN THAN LONG LEASING
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Transcript
Welcome
to
Amazon
Q3
2026
Earnings
welcome to amazon q3 twenty twenty six earnings call
Call.
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Thank
you.
I have
Hudson
Leach
H-U-D-S-O-N,
thank you i have hudson leach h u d s o n
L-E-A-C-H, is a very good
that the same
name of
the
l e a c h is that the name of the company
company?
L E A
C H is the name of the
that
l e a c h is that correct
correct?
Thank
you.
I have Hudson
Leach,
H-U-D-S-O-N,
thank you i have hudson leach h u d s o n
L-E-A-C-H,
and all of the things that we have to
note
you as a single
private
investor. Is
that
all
l e a c h and i'll note you as a private investor is that all correct
correct?
The tickets are
you,
Hudson. I have your
name
as
Hudson
Leach,
thank you hudson i have your name as hudson leach h
The first thing is that we have a very important
The first thing to do is to be able to do
and
I'll be
note that the
correctness is a very
as
you
private
u d s o n l e a c h and i'll note you as a private investor
investor. Is that
is that correct
correct?
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Welcome
to
Amazon
Q3
2026 or
Earnings
welcome to amazon q three twenty twenty six earnings call
Call.
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at
5
p.m.
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Welcome
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Q3
2026
Earnings
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Leach,
thank you i have hudson leach
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Is that
h u d s o n l e a c h is that correct
correct?
Welcome to the next
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2026
Earnings
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thank you i have hudson leach
L-E-A-C-H
Is that
h u d s o n l e a c h is that correct
correct?
Thank
you.
I have Hudson
Leach,
thank you i have hudson leach
H-U-D-S-O-N,
L-E-A-C-H
Is that
h u d s o n l e a c h is that correct
correct?
But thank
thank you
you.
I have Hudson
Leach,
H-U-D-S-O-N,
i have hudson leach h u d s o n
I think that's a good
The first thing that we have to do is to be able to do
that
Is
l e a c h is that correct
correct?
Thank
you.
And you mentioned you're a
private
thank you
investor.
so I'll note
you as a
private
investor. Is that
and you mentioned you're a private investor so i'll note you as a private investor is that right
right?
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Welcome to the
Amazon
Q3
2026
Earnings
Call.
scheduled
December
to
welcome to amazon q three twenty twenty six earnings call scheduled to
start
at
5
p.m.
start at five pm edt
EGT.
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Reviewer's
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Welcome
to
Amazon
Q3
2026
Earnings
welcome to amazon q3 twenty twenty six earnings call
Call.
If you've
registered in the US, you can see that
in
if you've registered in advance
advance,
please
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otherwise
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Thank
you.
I have Hudson
Leach,
H-U-D-S-O-N,
thank you i have hudson leach
L-E-A-C-H. Is
that
h u d s o n l e a c h is that correct
correct?
Thank
you.
I have Hudson
Leach,
thank you i have hudson leach
H-U-D-S-O-N,
N L E A C H
Is that
h u d s o n l e a c h is that correct
correct?
Thank
you,
thank you hudson
Hudson.
I'll note
you as a matter of
private
i'll note you as a private investor
investor.
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Have questions on product details.
detail pages.
and that you
can
simply
ask to
expired have questions on product detail pages
buy something based
on your
prior
purchases that
already
has your
and that you can simply ask to buy something based on your prior purchases
history
your
shipping
address
that already have your history
and
payment
info is
your shipping address and payment info
uniquely
helpful and
convenient for
is uniquely helpful and convenient for customers
customers.
Moving to
Amazon
moving to amazon ads
Ads.
we
generated
19% of the
billion
of
revenue in
Q3, up
12% year over
we generated nineteen point six billion dollars of revenue in q3 up twelve percent year over year
year.
Though there
are
were some
timing
anomalies
in
this
past
quarter, we
continue
to
be
pleased with
the
overall
though there were some timing anomalies in this past quarter we continue to be
momentum across the
our ad
pleased with the overall momentum across our ad offerings
offerings.
I'll mention
three
items
impacting the
growth
i'll mention three items impacting the growth rates
rates.
first
First, we
shifted
prime
day
into
Q2
for
most
we shifted prime day into q2 for most countries
countries,
moving
significant sales
and add
revenue that
were in
Q325
into
Q
moving significant sales and ad revenue that were in q3 twenty twenty five into
q2 twenty twenty six
Q226.
a tailwind
to our
Q2
2026
rate and a
headwind
to
Q3
a tailwind to our q2 twenty twenty six rate and a headwind to q3 twenty
twenty six
2026.
For
advertising,
that
was
for advertising that was
850
basis
per
points to
sequential
impact
to
Q3
year over
eight fifty basis points sequential impact to q3 year over year growth
growth.
Second,
Q226
included
the
first
season
of
NBA
on Prime
which lasted the first
second q2 twenty twenty six included the first season of nba on prime
year's
Q2 didn't have to
which last year's q2 didn't have
while
Q3 didn't have a lot
to
not
include
any
NBA. It
starts in
while q3 does not include any nba and starts in q4
Q4.
And
third, in
Q3
2025, we
changed
our
search
engine
marketing
and third in q3 twenty twenty five we changed our search engine marketing
programs to
drive
more
traffic
to search
pages on
to drive more traffic to search pages on amazon
Amazon.
It's a better
experience
for
customers and we
also
monetize
that
traffic at a
higher
it's a better experience for customers and we also monetize that traffic at a higher rate
rate and
helped
accelerate
advertising
revenue
growth
starting a
year
ago.
and we started
lapping
that
it helped accelerate advertising revenue growth starting a year ago and we
in
Q
started lapping that in q3
We expect
year over
growth to
with a
have return to the 20th
high
teens
and
in
Q
we expect year over year growth will return to the high teens in q4
four.
A natural
question is
whether
a
Agentic
shopping
from
external
horizontal
agents
a natural question is whether agentix shopping from
is
meaningfully
impacting
Amazon
external horizontal agents is meaningfully impacting amazon ads
ads.
and the answer
is
and the answer is no
no.
Few
customers
are
doing
much
shopping this
way
yet as the
experience
is
still
not
few customers are doing much shopping this way yet
great nor
more
convenient than
coming to
a
retailer
as the experience is still not great nor more convenient than coming to a retailer directly
directly to
research or
one-click
order
to research for one click order there
there.
Q3
was
chock full
of
innovation
from
our
ads
q3 was chock full of innovation from our ads team
team that
we
expected to
expect have
impact in the
coming
that we expect to have impact in the coming months
months.
Headline by
Amazon
Ads
Agent,
which
brings
together
our
full
advertising
offering
under
a
single AI
headlined by amazon ads agent which brings together our full advertising offering under a
first
single ai first platform
platform.
Backed
by
trillions of
shopping, brand
and
streaming
backed by trillions of shopping browsing and streaming signals
signals,
it
supports
advertisers with
every
step
with
insights, answers,
and
the ability
to
it supports advertisers at every step with insights answers
optimize
and act
on
their
and the ability to optimize and act on their behalf
behalf.
We also
launched
full
funnel
campaigns
in
Amazon
Ads
we also launched full funnel campaigns in amazon ads agent
Agent,
bringing
sponsored
ads
display, video, and
streaming
TV into
a
single
bringing sponsored ads display video and streaming tv into a single campaign
campaign.
Advertisers
provide
initial
inputs
including
budget and
advertisers provide initial inputs including budget and duration
duration.
and
Amazon's AI.
plans.
executes and
continually
optimizes
the
and amazon's ai plans executes and continually optimizes the rest
rest.
We're
continuing to
see
momentum
in
several
other
areas.
I'll mention just a few
we're continuing to see momentum in several other areas i'll mention just a few
prime
Video is
has
emerged as
a
significant
business
with
a
revenue
run
rate in
the ten
tens of billions
prime video has emerged as a significant business
of
dollars and
now
profitable
in
its
own
with a revenue run rate in the tens of billions of dollars and now profitable in its own right
right.
We have momentum
with
hit
shows
like
Carrie,
The
Summer I
Turn
Pretty,
The
Boys,
Off
we have momentum with hit shows like carrie the summer i turned pretty the boys
Campus,
Reacher and
off campus reacher and fallout
fallout
and
breakout
movies
like
Project
Hail
Mary along
with
compelling
live
sports.
including the
and breakout movies like project hail mary along with
Thursday
night
football, off
to
its
best
start
ever in
compelling live sports including thursday night football off to its best start ever in twenty twenty six
2026.
NBA
on
nba on prime
Prime,
nascar
NASCAR, the
Masters, and
UEFA
Champions
League
the masters and uefa champions league soccer
Soccer.
We
recently
launched our most
powerful
devices one of the most
lineup
we recently launched our most powerful devices lineup yet
yet
with
34
new products.
across
Echo,
Kindle, Alexa,
Tablets,
Fire
with thirty four new products across echo kindle alexa tablets
TV,
Ring and
B.
fire tv ring and bee
It's
early,
but
we're
off to
a
very
strong
start and
excited for
more
customers to get their
hands
on
it's early but we're off to a very strong start and
excited for more customers to get their hands on these
these as we
head into the
as we head into the holidays
holidays.
And finally,
Amazon
Leo
remains
on
track
to begin
an
initial
service this
and finally amazon leo remains on track to begin initial service this year
year.
We're heading
into
one of
our
most
exciting
stretches of the
year
with
both
reInvent
and the
we're heading into one of our most exciting
stretches of the year with both re:invent and the holidays
holidays.
And I want to
thank
our
teammates for
their hard
work and
invention
to
make
customers
lives
better and
easier every
day.
and i want to thank our teammates for their hard work and invention to make customers' lives
better and easier every day
day.
What we're
building
at
Amazon
is unlikely to
anything
that's ever
been seen
what we're building at amazon is unlike anything that's ever been seen before
before.
There has
never been
a
there has never been a business
business with a
trillion
dollars
of
annual
with a trillion dollars of annual revenue
revenue.
Amazon is on
a
path to
have two
of
them in
AWS
and
amazon is on a path to have two of them in aws and stores
stores.
It's
rare, and
we're
energized
by
what we're
what's
it's rare and we're energized by what's ahead
ahead.
Over to you,
over to you brian
Brian.
Thank
you,
thank you andy
Andy.
Let's start
with our
top
line
financial
let's start with our top line financial results
results.
Worldwide
revenue
is
was
$201.9
billion.
a 12%
increase
worldwide revenue was two hundred and one point nine billion dollars
year over
a twelve percent increase year over year
and
13%
increase year over
year excluding
the impact of the
foreign
and thirteen percent increase year over year excluding the impact of foreign exchange
exchange.
Worldwide
operating
income
was
$28.1
one billion
worldwide operating income was twenty eight point one billion dollars
with an operating
margin of
$13.5
point nine
with an operating margin of thirteen point nine percent
which
is our
highest
operating
margin
which is our highest operating margin ever
ever.
Starting with
our
north
American
international
segment
starting with our north american international segment results
results.
first let me
remind you
the
Prime-Base
Base shifted
this
year with
the
sales
event
occurring
in
first let me remind you that prime day shifted this year
Q2 for
most of
our
largest
countries,
including
the
United
with the sales event occurring in q2 for most of our large
largest countries including the united states
States.
In
2025,
prime
Day
was
entirely in
in twenty twenty five prime day was entirely in q3
Q3.
excluding
the
impact of
this prime
excluding the impact of this prime day
day
time
change.
time change
third
quarter
2026
year-over-year
growth would
be
approximately
$400
basis
points
third quarter twenty twenty six year over year growth would be approximately four hundred basis
points higher
higher.
In
Q3, we
saw
strong
customer
in q3 we saw strong customer engagement
engagement and
a
continuation of
trends from
the
first
half of the
and a continuation of trends from the first half of the year
year.
In the North
America
in the north america segment
segment, third
quarter
revenue was
$112.9
billion.
third quarter revenue was one hundred and twelve point nine billion dollars
an increase
of
6% year per
over
an increase of six percent year over year
year.
International
segment
revenue
is
$43.1
one billion
international segment revenue was forty three point one billion dollars
an increase
of $8.5
year-over
over
an increase of eight percent year over year
excluding
the impact
of
foreign
excluding the impact of foreign exchange
exchange.
Worldwide
paid
units
for 12
year over
worldwide paid units grew twelve percent year over year
year.
Prime
remains a
key
pillar of
our
prime remains a key pillar of our business
business.
Hundreds of millions
Prime
members
are responsible
to the
our
combination of
vast
hundreds of millions of prime members are responding to our combination of vast selection
selection,
low price, and the selection of the
prices, and record
delivery
low prices and record delivery speeds
speeds.
Over the
past
year,
monthly
orders
of
fresh
groceries placed in the
over the past year orders of fresh groceries
by
our prime
members
for
three
same
days.
delivery have
more
than
placed by our prime members for free same day delivery have more than tripled
tripled.
The shift to
let's shift to profitability
profitability.
North
America's
segment
operating
income
was eight
$8.7
seven billion
north america segment operating income was eight point seven billion dollars
with an
operating
margin of
$7
$7.5
point seven
with an operating margin of seven point seven percent
International
segment
operating
income was
$1.6
six billion
international segment operating income was one point six billion dollars
with an
operating
margin
of $3.5
$3.7
seven
with an operating margin of three point seven percent
In our
fulfillment
network, the
team
navigated
higher
transportation
costs
in our fulfillment network the team navigated higher transportation costs
from
fuel
inflation and
higher
line
haul
from fuel inflation and higher line haul rates
rates.
even with
these
headwinds, we still have to do
lowered our
overall
cost of
to
serve
in
Q
even with these headwinds we still lowered our overall cost to serve in q3
through
better
inventory
through better inventory placement
placement,
shorter
shipping
distances,
and
package
shorter shipping distances and package consolidation
consolidation.
Shipping
costs
increased
11%
year over
shipping costs increased eleven percent year over year
year versus
a 12% per
increase in
versus a twelve percent increase in units
units.
excluding
fuel and
line
haul
inflation,
excluding fuel and line haul inflation
shipping costs, and the
grew
eight percent
or
approximately
four
basis
points
slower
than
unit
shipping costs grew eight percent or approximately four hundred basis points slower than unit growth
growth.
Robotics and
AI.
are delivering the
measurable
robotics and ai are delivering measurable gains
gains.
in
productivity
and
employee
in productivity and employee safety
safety, which
we'll
expect
to
compound in the
which we'll expect to compound in the future
future.
In
twenty twenty
we
doubled
our fleet
of
robotic
arms
like
Cardinal and
in twenty twenty six we doubled our fleet of robotic arms like cardinal and sparrow
Sparrow. We're
also
developing robotic
foundation
we're also developing robotics foundation models
models
that
enable
faster
programming
and
teach robotics.
robots
increasingly
complex
physical
that enable faster programming and teach robots increasingly complex
physical tasks
tasks with
the
goal
of
delivering
useful robotic
at
with the goal of delivering useful robotics at scale
scale.
Looking
ahead, we
see
meaningful
opportunities to
improve
looking ahead we see meaningful opportunities to improve productivity
productivity
across
our
global
fulfillment
across our global fulfillment network
network.
and
lower
our
cost to
and lower our cost to serve
serve.
while continuing to
get products
to
customers
while continuing to get products to customers faster
faster.
Our
operating
margins are
fluctuate
quarter
to
quarter, but we're going to be able to do
focused on the
sustained
our operating margin may fluctuate quarter to quarter
long-term
improvement in
our
cost
to
serve per
but we're focused on sustained long term improvement in our cost to serve per unit
unit.
Moving to our
AWS
moving to our aws segment
segment.
revenue
is
$46
six billion
and grew
$39.6
point three
year
over
revenue was forty six billion dollars and grew thirty nine point three percent year over year
year.
driven
by
both
core
and AI.
driven by both core and ai services
services.
We added
three
3.8
billion
in
quarter over the
quarter
we added three point eight billion dollars in quarter over quarter revenue
revenue.
AWS
now
has
an
annualized
revenue
run
rate
of
$184
billion.
aws now has an annualized revenue run rate of one hundred and eighty four billion dollars
Customers
continue
to
move
the
cloud
and
scale
their
use of
AWS
core
customers continue to move to the cloud and scale their use of aws
core services
services and
increasingly
customers
who want
the
full benefit of the
AI.
and increasingly customers who want the full benefits of ai
are
accelerating
their
transition
to the
are accelerating their transition to the cloud
cloud.
We see a
strong
linkage
between AI
spec and the
spend
we see a strong linkage between ai spend
growth in
our
revenue
for
core
and growth in our revenue for core services
services.
As customers invest in the
AI,
as customers invest in ai
we
see
a
corresponding
increase
in core
we see a corresponding increase in core consumption
consumption.
and we
expect
that
relationship
to
and we expect that relationship to strengthen
strengthen
as
more AI
workloads
move
into
as more ai workloads move into production
production and
drive
additional
demand
for
compute
storage and
and drive additional demand for compute storage and networking
networking.
AWS
operating
income
was
17% of the
point eight
with an operating
aws operating income was seventeen point eight billion dollars
margin
of
$38.6
point seven
with an operating margin of thirty eight point seven percent
percent.
reflecting
strong
growth and
our focus on the
driving
reflecting strong growth and our focus on driving efficiencies
efficiencies.
Our investments
in custom chips
and
custom
our investments in custom chips and custom networking
networking will
along with
software
and
process
improvements
along with software and process improvements
are helping
us
optimize
capacity
are helping us optimize capacity
and build
a
more
cost-efficient
build a more cost efficient infrastructure
infrastructure.
As we've
long
said, we
expect
AWS
operating
margins
to
as we've long said we expect aws operating margins to fluctuate
fluctuate.
driven in
part by
the level
of
investment we're
making at any
point in
driven in part by the level of investment we're making at any point in time
time.
Our AI
offerings are
gaining
traction
with
our ai offerings are gaining traction with customers
customers.
with AI
revenue
growing
triple
digits year over
ai revenue growing triple digits year over year
year.
Bedrock has been a
significant
growth
bedrock has been a significant growth driver
driver.
Now, turning to
our
cash
cap
now turning to our cash capex
which
was
75%
billion
in
which was seventy five point nine billion dollars in q3
Q3.
this
primarily
relates to
AWS
and
AI.
this primarily relates to aws and ai
as we
invest in the
to support
strong
customer
as we invest to support strong customer demand
demand.
We
continue to
make
significant
investments,
especially
in AI.
we continue to make significant investments especially in ai
as
we believe it's a very important
to be
massive
opportunity
as we believe it to be a massive opportunity
with the
potential
to
drive
long-term
revenue
and
free
cash
the potential to drive long term revenue and free cash flow
flow as
well return to the
on
invested
as well as return on invested capital
capital.
I'll finish
with
our
financial
guidance
for
Q
i'll finish with our financial guidance for q4
Q4
net sales
were
are
expected to
be
between 200 and 200 to
and
billion and $24
q4 net sales are expected to be between two hundred
$240
billion.
forty billion dollars and two forty seven billion dollars
dollars. We
estimate
the
year-over-year
impact of
changes in the
foreign
exchange
rates based
on
current
we estimate the year over year impact of changes in
foreign exchange rates based on current rates
rates, which would
we
expect to be ahead
headwind
of
approximately
60
basis
points in the
which we expect to be a headwind of approximately sixty basis points in the quarter
quarter.
G4 operating
income is
expected
to
be
between
$28.5
q4 operating income is expected to be between twenty eight point five
five billion
billion dollars
and $5
$33.5
point five billion
and thirty three point five billion dollars
dollars
I'll mention
one
factor
impacting
our
Q4
i'll mention one factor impacting our q4 guidance
guidance.
Amazon
Leo's
commercial
service is
on
track
to
begin a
initial
service this
amazon leo's commercial service is on track to begin initial service this year
year.
and we
expect to
begin
capitalizing
certain
costs in
Q1
of next
and we expect to begin capitalizing certain costs in q1 of next year
year.
including
production
and
launch
including production and launch costs
costs.
This is later
than I've
been
predicting in
earlier
earnings
this is later than i've been predicting in earlier earnings calls
calls.
As a
result,
we
will
continue
to
expense the majority of
our
LEO
related
costs in
Q
as a result we will continue to expense the majority of leo related costs
in q4
We're ready
to
serve
customers the
this holiday
we're ready to serve customers this holiday season
season and
to support the
millions of
customers
building
with
and to support the millions of customers building with aws
AWS.
I want to
thank
our
teams
across
Amazon for the next
hard
work
and
focus
on
i want to thank our teams across amazon for their hard work and focus on customers
customers.
Our commitment
to
elevating
the
customer
our commitment to elevating the customer experience
experience
remains the only way to do
reliable
way to
create
lasting
value for
our
remains the only reliable way to create lasting value for our shareholders
shareholders.
With
that,
let's move on
to
your
with that let's move on to your questions
questions.
Thank
you.
At this time, we will
now open
the
call
up
for
questions.
thank you at this time we will now open the call up for questions
We ask
each
caller
to
please limit
yourself
to
one
question.
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
handsets
to
provide
optimum
sound
quality.
Once
again, to
initiate a
question,
please
press
star, then
one on
your
touch
tone
telephone at
this
time.
Please
hold what
we pull
for
questions. Thank
you.
Okay, so I'm going to go ahead and do
And our
first
question
comes from the
the
line
of
Justin
Post with
and our first question comes from the line of justin post
Bank of
with bank of america
America.
Please
proceed with
your
please proceed with your question
question.
Great. Thank
you.
um
andy can
you just
see
the
cloud
business
andy could you just see the cloud business accelerate
accelerate, which
is really
nice but the
quarter over
quarter growth slowed
And I just
wondering if
there's
which is really nice but the quarter over quarter growth slowed
any
call
outs
there on
the
customer
side
or
token
costs or
anything
and i'm just wondering if there's any call outs there on the customer side or token costs
that kind
of
drove
that.
and how you
think about
the
capacity adds
in
or anything that kind of drove that and how you're thinking about
Q4.
And then Brian,
maybe
just
any
impact
of fuel
capacity adds in q4 and then brian maybe just any impact of fuel costs
costs on
your
guidance
and
Q4. Thank
on your guidance in q4 thank you
you.
Yeah.
I'll start
with the
growth
question.
We're really
pleased with the
yes i'll start with the growth question we're really pleased with
growth.
You know,
39.3
on a
business
that's
got
a
hundred
the growth thirty nine point three percent on a business
$184
billion.
got one hundred and eighty four billion dollars
annual
revenue
run
rate is quite a
unusual.
or our
fastest
growth in
about
five
years or six
annual revenue run rate is quite unusual our fastest growth
in about five years or six
quarter
consecutively
of
acceleration.
And you know,
quarter consecutively of acceleration
we're
adding a lot
quite of
bit
a of
and we're adding
capacity i think if
you
look
at
what's
driving
the growth of
right
quite a bit of capacity think if you look at
now,
it's
a
combination
a few
things you know
what's driving the growth right now it's a combination of a few things
first
on the AI.
side,
the
unusual
top to
first on the ai side the
bottom
static
functionality we
have, whether
the unusual top to bottom stack functionality we have whether you're
you're
building your
own
building your own model
model.
with
SageMaker
AI.
which
is
the
easiest way to do
build your
own
model.
or you
want to
with sagemaker ai which is the easiest way to build your own model
leverage
one
of
the
leading
frontier
models
with
high
security
and
very
or you wanna leverage one of the leading frontier models with
strong
price
performance.
you know people
can use
bedrock.
high security and very strong price performance people can use bedrock
Whether
you
whether you are
are
a
building
your
own
agents
where
we
have
capabilities
like
strands
and
agent
core
building your own agents where we have capabilities like
to
build and
to
run
those
securely
and
scalably
or are you going
strands and agent core to build and to run those securely and scalably
to
use
turnkey
agents
which
most
companies
do if
you
just
look
across
or you're gonna use turnkey agents which most companies do if you just look across
you know,
Kiro
for
coding
you know curo for coding and
and
connect
for the next
connect for
call
center and
transform
for
migration
and
quick
which is
growing
incredibly
call center and transform for migrations and quick which is growing incredibly fast
fast as an
AI
companion at
as an ai companion at work
work.
people
are
adopting
those
very
quickly
And then, you
know,
we add
a
lot of
people are adopting those very quickly and then you know we add a lot of
capacity
every
quarter now
the amount that
add to the capacity of the
every
quarter is
not
equal.
capacity every quarter now the amount that we add every quarter is not equal
and
and
um
you
know
we're
adding
different
amounts
each
quarter
but if I
look at
how much
we've
you know we're adding different amounts each
added
this
year and
what we
have
planned
over the
quarter but if i look at how much we've added this year
and what we have planned over the next
next
I'll call
it
um eight
quarters or
so you know
which is
about as
far
out
as we're
get
i'll call it eight quarters or so you know which
about as far out as we get eight
eight to
ten
quarters.
we have
a
lot
of
capacity
coming as
well.
and then you know
I
layer on top
to ten quarters we have a lot of capacity coming as well
of
that
too
just
the
impact
of
chips
and then i layer on top of that too just the impact of
where we're very
well
positioned
for what's
happening in AI.
chips we're we're very well positioned for what's happening in ai because
because
increasingly
what
you're finding is that
right
now
is
most
customers
every
increasingly what what you're finding right now is
customer
that
runs
that
uses
ai
at
is most customers every customer that runs that uses ai
scale.
scale
but
particularly
enterprises
now as
they're starting to
deploy
more
inference
but particularly enterprises now as their
into
production they
are
very
eager
to save
on
price
starting to deploy more inference into production they are very eager to save on price
performance.
and
tradium
performance and trainium
with
a
meaningful
advantage of having to be able
has in
price
performance
versus
other
alternatives is very
compelling to
a meaningful advantage it has in price performance versus other alternatives is very compelling
people.
and then as
more and
more
people and then as more and more people
people
are
using
AI.
in a
very broad
way.
it drives a lot
of
the
are using ai in a very broad way it drives a lot of the core
core
in
capabilities
like
reinforcement
learning
and
post-training
and
tool
in in capabilities like reinforcement learning and post training and tool calling
calling.
and we
have the
leading
CPU
chip in
Graviton.
which
is
about
30 to
40 percent
and we have the leading cpu chip in graviton
word
price
performant than
there are
other
X eighty
six.
which is about thirty to forty percent more price performance than their other x eighty six
providers.
providers so it's
So it's
those
things are really
driving
very
significant
growth.
those things are really driving very significant growth
The amount
of
capacity we
add
each
quarter
will
vary, but
we're
very I
mean
the amount of capacity we add each quarter will vary but we're i mean
at
this
scale to
at this scale
be
projecting
growing over
40%
year over
year in each
of
be projecting growing over forty percent year over year in each of
2027 and
2028
is
pretty
significant.
and the fact that
we
believe
that
this can
be a
twenty twenty seven and twenty twenty eight is pretty significant
trillion
dollar
revenue
business
in five to ten
and the fact that we believe that this can be a one trillion dollars revenue business in five
years.
It's an
extraordinary,
unusual
ten years an extraordinary unusual opportunity
opportunity that we're going to be able to
very excited
to be
we're very excited to be pursuing
pursuing.
And Justin, on
your question about
fuel and if you have
justin on your question about fuel
line
linehole inflation.
I would
say I'm
looking
at Don
don't have an exact number for you,
and line haul inflation i would say i'm looking
but it
is
higher in
Q4 than it
was in
don't have an exact number for you but it is higher in q4 than it was in q3
q3
If
you
remember,
we
instituted a
fuel
surcharge in the
beginning of
the
year
for
if you remember we instituted a fuel surcharge
FBA
sellers.
that
recovers
at the beginning of the year for fba sellers that recovers
some
but not
all of
the
costs that
we're
seeing on
fuel
for for
those
shipments and then
some but not all of the costs that we're seeing on fuel for those shipments and then
the
remaining
remaining
part of the
is
on
retail
part is on the retail
inbound
shipments and
outbound
shipments.
So it's
in
there.
It's a little
bit
higher than
inbound shipments and outbound shipments it's in there it's a little bit higher than q3
Q3.
Thank
you.
Our next
question comes from
the
line
of
Brian
Nowak
with
Morgan
thank you our next question comes from the line of brian nowak
with morgan stanley
Stanley.
Please
proceed with
your
please proceed with your question
question.
Thanks,
for saying my
question
questions. I have
two
andy you're
you're
thanks for taking my questions i have two andy
your excitement about
AWS
has
is
coming through
the
line.
and it's
pretty
rare.
you would make
your excitement about aws is coming through the line and it's
comments
about
a you
know
trillion
dollars of
revenue
five to
it's pretty rare you'd make comments about a trillion dollars of revenue
ten
years from
now.
It's more than
usually
give.
so can you
just be
walk
us
five to ten years from now it's more than you usually give so
can you just maybe walk us through
through
how
you
get to
that
trillion of
dollars is
it
top
down
Is it
bottom
bottoms
up so what
gives
you
how you get to that trillion of dollars is it top down is it bottoms up so what gives you confidence
confidence
that you're going to
be able put
up
that
type
of
revenue
growth
in
to get to
that type
of
number in the
next
five to
you're going to be able to put up that type of revenue growth to get to that type of number in the
ten
years.
Then the second one,
just
for for
either of
you on the
robotic
five to ten years then the second one just for either of you
side
as
we look
into
27 what
are
the
key
milestones
you're
on the robotics side as we look into twenty seven
both focused
on on
the
robotics?
side for
the
retail
what are the key milestones you're both focused on the robotics side for the retail
business
business.
Yeah, on the
AWS
side, you
know it's
if just look
at the
yes on the aws side
growth
rates,
Brian,
you
look
at the growth
rates on the
if you just look at the growth rates brian
run
rate and
then look
at
what
we're
look at the growth rates on the run rate and then look at what we're projecting
projecting
in
27
and
twenty
I think it's a very good idea.
And
as I've
said a
few
times you
in twenty twenty seven and twenty twenty eight and as i've said a few times
know,
we
will
we will always
always
despite
how
much
capacity
we're
despite how much capacity we're providing
providing,
we, you
know,
the
big
chunks
of
capacity
that
people
take
that you know
the
hundreds
of millions
the big chunks of capacity that people
megawatts or
sometimes up
to a
gigawatt of
capacity.
take the hundreds of megawatts or sometimes up to a gigawatt of capacity
those
big
chunks
are
reserved
well in a
advance
because you know you
can't
leave
a
gigawatt of
those big chunks are reserved well in advance
capacity hanging
around and
so we
have very
cause you can't leave a gigawatt of capacity hanging around
good
visibility
into
27
and
28 and so
some
and so we have very good visibility into twenty twenty seven and twenty twenty eight
of
twenty
29
too.
with
respect
to what we're
customers
want in
those
some of twenty nine too with respect to what
really
big
chunks
of
capacity.
We will
always
customers want in those really big chunks of capacity
leave
a fair bit of a lot
capacity
available
for
on-demand on
we will always leave a fair bit of capacity available for on demand on ecg
EC2
or
in bedrock.
and we're
in
working closely with
our
customers and they'll
have plenty of
capacity
to
be able to
two or in bedrock we're working closely with our customers and they'll have plenty of capacity to
use an
AWS.
But we
have
very
good
visibility
into the
next
be able to use in aws but we have very good visibility into the next
few
years of
what
AWS will
looks
like.
those types
of
growth
rates, when you
do the
few years of what aws looks like those types
math
on
the on the
revenue
and the
revenue
run
rate we
of growth rates when you do the math on revenue and the revenue run rate we have
have gets
you
get you
pretty
quickly
to
escalating
numbers.
And
pretty quickly to escalating numbers and then
then
I'd
say
that on top of
not
believing
that a lot of people are not going to be able to do
of
the
usage
we
see
i'd say that on top of not believing that a lot of the usage we
today is going
to
attenuate any
anytime
soon.
see today is gonna attenuate anytime soon
we're
still
really
we're still really early
early.
in
enterprises
using
inference in
their
production
applications in
a
pervasive
in enterprises using inference in their production
way.
It's just
it is
just
really
early. And some of
that
applications in a pervasive way it's just it is just really early and some of that is
is
enterprises
having
enough
people
who who
know
how
to
operate in
an
AI
and
post-train and
enterprises having enough people who who know how to operate in ai and post trade and find
fine-tune
models for the right
applications.
Some of it is a
the cost
of
inference.
you know i think if
tune models for the right applications some of it is the cost of inference
we
all
watch
enterprises to be
able
use
inference the
way
we
all
you know i think if we all want enterprises to be able to use inference
believe they
will.
we have
to
keep
working
on
taking the
cost of
infant
the way we all believe they will we have to keep working on taking the cost of inference
down.
That is a
huge
mission
for AI.
AWS.
It's one of the
significant
reasons
down that is a huge mission for aws it's one of the significant reasons
why
we're
building our
own
custom
silicon and
tranium is
that
we
just
really
believe
it's
why we're building our own custom silicon in trainium is that we we just really believe it's
incredibly
important
for
customers to
be able use
to
inference in
a much
more cost effective
incredibly important for customers to be able to use inference in a much more cost effective way
way.
That has come
down a
lot.
the cost of
inference
over the
that has come down a lot the cost of inference over the last
last
uh
couple
years and I
think it will
come
down
meaningfully
more.
And
couple of years and i think it will come down meaningfully more
so, you know,
and then you
just
think about
then you just think about
just think
about what
you're
seeing.
uh you know if you think
about
security
as an
example, just by
just think about what you're seeing you know if you think about
itself
the
models
today are not a
so
security as an example just by itself the models today are
advanced that
the
vulnerabilities
that
they're
so advanced that the vulnerabilities that they're finding
finding
humans
just
haven't
found.
And if
you've
had
access to
these
models, it
humans just haven't found and if you've had access to these models
leads
to
you're
using these
models
to both
find
them
and
ultimately
to
help
with
patching
it leads to you're using these models to both find them and ultimately
them
and
deploying and there
are
some
people
who
think
help with patching them and deploying and there are some people who think that
that
uh
the
amount
the
total amount
of
tokens
used over
the
next
year or
the the amount the total amount of tokens used over the next
year or two
two,
20%
of
it if some
significant percent of
it
may end
up
being
just
security and that's
twenty percent of it if some significant percent of it may end up being just security
a
relatively
new
use
case on
top of
what we're
seeing
with
coding and how
and that's a relatively new use case on top of what we're seeing with
that
continues
to
grow, on
top of
what we're
seeing
with
the
coding and how that continues to grow on top of what we're seeing with with you know the various
various
I'll call
it ai
companions
both in
the
consumer
i'll call it ai companions both in the
space
and in
the
work
like
with
Quick.
And these are
just
consumer space and in the workspace like with quick
the
initial
big
use
cases and
you
layer on top
of
and these are just the initial big use cases
that what
you're going to
see
with
enterprises where
I
believe
virtually
and you layer on top of that what you're gonna see with enterprises where i believe virtually
every
every
enterprise
modern
enterprise
production
application will
be
rewritten to
be
enterprise modern enterprise production application will be rewritten
agentically
capable.
because that's the
way
you're going to
have
to
deploy
if
you want
to
to be agentically capable because that's the way you're gonna have to deploy
move
quickly
or you want to
actually
guard in the
right
way
against some of
the
security
if you wanna move quickly or you wanna actually guard in the right way against some of the security risks
risks there
is
just
so
much
is just so much
AI.
coming.
So, you know,
that's
you can't
ai coming so you know that's you can't predict
predict, you
can't
predict with
any
certainty
five
to
10
years from
now
especially if
you can't predict with any certainty five
at these types
of
growth
rates, but
it's
not a
stretch for
us
to
to ten years from now especially these types of growth rates but it's not a stretch for us
imagine that
this could be a good
over a
trillion
dollar
to imagine that this could be over a trillion dollar business
business.
On
the robotic
on the robotics side
side,
What I'm doing is
I would
say that the problem that the
is
that
what i would say is that
it's pretty
remarkable
what's
happening in the
robotics.
right
now.
I'll say in
it's pretty remarkable what's happening in robotics right now
general,
but
particularly the
at
Amazon we
have
over
a
million
robots
i'll say in general but particularly at amazon
now in
our
fulfillment
network.
and while there
they're
having
we have over a million robots now in our fulfillment network
very
significant
impact on
our
cost
structure and on
our
and while they're having very significant impact on our cost structure and on our
productivity and
on
safety.
You know, if you look at
our
safety
numbers and
our
fulfillment
productivity and on safety you know if you are you look at our safety numbers and our fulfillment
network, there
they're
at
um
record
low
numbers. We've
made
huge
network they're record low numbers we've made huge progress
progress over the
last
four to
five
years on
robotics.
has been a
big
piece of
that.
and yet
i would
tell
you,
over the last four to five years and robotics has been a big piece of that
we're
still
so
early
with respect to the
to both
what
we
and yet i would tell you we're still so early with respect to
have
deployed
built and
deployed
and what
we're working
both what we have deployed built and deployed
on.
and I
think
that you'll
see we
will
always have to do
and what we're working on and i think that you'll see we will always have
have a lot
of
teammates in
our
fulfillment
centers,
but I
think a
lot of people are going to be able to do
lot
of the
jobs
that we
a lot of teammates in our fulfillment centers but i think a lot of the jobs that we have
have that
are
more
repetitive that
we have
humans
doing will
be
done
by
robots.
I think
we
will, you
are more repetitive that we have humans doing will be done by robots
we're
investing in
all sorts
of
additional
robotics.
of all
different
i think we will we're investing in all sorts of additional robotics
form
factors.
I think we
have
the
opportunity
of all different form factors i think we have the the opportunity
to
also
to also
um assist on
some of
the
delivering a little
the
on last
100
yards to
customer
assist in some of the delivering on the last
stores. We have a
lot
coming. And
so, you
know, for
us the
hundred yards to customer stores we have a lot coming and so
way
we
measure robotics
are
you know for us the way we measure robotics are
does
it
lead
to
comparable
or
better
does it lead to comparable or better productivity
productivity,
safety, and so
cost, and so
safety
structure,
and
time
to
delivery.
And when we
like that kind
combination
of
cost structure and time to delivery
economics,
we
will
deploy
it
at
and when we like that combination of economics we will deploy it at scale
scale.
in
our
fulfillment
network.
And if I look at the
new
designs that
we
have
coming in
our film network
in in our fulfillment network and if i look at the new designs that we have coming in our
fulfillment
fulfillment network
network.
uh they including
our
you know our
expansion
of
same-day
they including our expansion of same day facilities
facilities they
are
very
heavy
on
robotics.
they are very heavy on robotics so
so
we
think
it
it's how
had
a big
impact and we
think
it's
small
compared
to
what it's going to
be in the
next five
we think it's had a big impact and we think it's small compared to what it's going to be in the next five
years.
Thank
you.
Our next
question comes from the
line
of Mark
thank you our next question
Mahaney
with
Evercourt
comes from the line of mark mahaney with evercore isi
ISI.
Please
proceed with
your
question.
please proceed with your question
Two things.
one.
uh first uh
thanks a
lot
for
the
forward
comments
two things one first thanks a lot for the
on
AWS
growth. Could
I
ask you
to
draw
out
on
forward comments on aws growth could i
margins
too?
I know
that
margins can
move up and
ask you to draw out on margins too i know that margins can move up
down quarter
to
quarter,
but over
the
next two
years, you think about the
current
and down quarter to quarter but over the next two years do you think the current margin
margin
structure
is
relatively
stable.
you know we kind of
hold that these kinds
of
high
30s,
forty percent
structure is relatively stable we kind of hold at these kind of high 30s forty percent
operating
margins for
AWS.
And then on
perishable
checkout,
I'm
a
super
operating margins for aws and then on perishable checkout
excited
about
this
opportunity just
watching
how
it's
rolled
out in my
i'm super excited about this opportunity just watching how it's
neighborhood and in
other
areas.
rolled out in my neighborhood and in other areas
How much
coverage do you
have
for
perishable
checkout? In other words, how
many, many
PIME
how much coverage do you have for perishable checkout in other words how many
households do you
think you've
covered uh
with
perishable
checkout?
and for those that
prime households do you think you've covered with perishable checkout
you
that have that have exp
uh
used
it, how
much
of a
boost do you
think that
is
and for those that you that have used it
per
prime
household like
is this something that
how much of a boost do you think that is per prime household like is this something that increases
increases
spend per prime
household
by
20%?
50%, a hundred
100% just going
given how
large the
fresh grocery issue
spend per prime household by twenty percent fifty percent one hundred percent just given how large
cat
category
is.
Thanks a
the fresh grocery category is thanks a lot
lot.
Hey, Mark, let
me
start with
the
operating
margin
outlook for
AWS.
So we're
not
hey mark let me start with the operating margin outlook for aws
so we're not guiding
guiding
the
out
beyond.
out beyond
we're not
guiding at
it all on
our
margin
for
aws um
But I can tell
you, give
you
my
not guiding at all on our margin for aws
color on
it.
so you know
very you've
seen
but i can tell you give you my color on it
very
very we've seen very strong
strong.
stop
op margin
margin.
38.7%
this
quarter.
and I
thirty eight point seven percent this quarter
would add
that
the
profitability has
been
seeing
recently
i would add that the profitability you've been seeing recently is
is
really
not a
random
output.
It's the
result
of a lot
of
disciplined
efficiency
really not a random output it's a result of a lot of disciplined efficiency gains
gains
capacity
capacity optimization
optimization.
closely
managing
our
fixed
closely managing our fixed cost
cost.
And as
Andy
said, you
know,
the
inclusion
of
over
time more and
more
and as andy said the inclusion of over time more and more
custom
custom chips
chips into
our
cost
uh
into our cost structure
structure.
uh however you
know, there
are
other
things.
bouncing
around.
however there are other things
in fact
the, you
know
bouncing around in fact
the
outsized growth
of AI.
puts
market
pressure
on the
business as a
whole
because
market
margins are
outsized growth of ai puts margin pressure on the business as a whole because
lower
the margins are lower there
there.
We are, we
are happy with the
progression
in
both
core
and
we are happy with the progression
AI
in both core and ai margins
margins.
and there as andy
said
earlier,
they're
head
of
where the
core
was it
a
similar
point in
time.
but
they're
as andy said earlier they're ahead of where the core was at a similar point in time but
still
lower.
so there's gonna be that
mix
issue there's
also a
headwinds
from
but they're still lower there's going be that mix issue there's also headwinds from
component
pricing that
we've
talked
about.
So
component pricing that we've talked about
can
predict
it,
but
uh there's going
to
gonna be
always
a
confluence of
these
multiple
cannot predict it but there's going to be always a confluence of
factors
that
we work
working
very
hard
on
the
cost
multiple factors that we're working very hard on the cost side
side.
and the
efficiency
and the efficiency side
side and dealing
with
investments
and
new products.
product.
and dealing with investments and new product
margins as
they
start
and
launch and
reach
uh
margins as they start up and launch and reach scale
scale.
On
on the
the
perishable
checkout
Mark
I should have to do
share
your
enthusiasm.
about
perishables checkout mark i share your enthusiasm
it. It's
you know, it's
as we've
had
a, you
know, we've
had a
big
grocery
about it it's as you know we've had a
business for a
while
and
it's
mostly
been
in the
we've had a big grocery business for a while and it's mostly been
middle
aisles of what
you'd
find in a
grocery
store
consumables can
canned
goods,
pharmaceuticals, and other
in the middle aisles of what you'd find in a grocery store consumables canned goods
items, beauty
products.
And we've had
this, you
know,
leading
organic
grocery
store in
pharmaceutical items beauty products and we've had this you know leading organic grocery
and whole foods
market,
which
also
is you know
growing
faster than the
rest of
grocery
segment, both in
store and whole foods market which also is growing faster than the rest of the grocery segment
the
top
line and the
bottom
line with
a
new
format
and
daily
shop and
in
in the top line and the bottom line with a new format and daily shop
urban
environments it's
doing
really
well that we're
in the
process of
rolling
out
over the
next
couple
of
in urban environments it's doing really well that we're in the process of rolling out over the next
years.
But we've always
known if
we
wanted to be able
serve
customers the way
we
think
they
couple of years we've always known if we wanted to be able to serve customers
want to be
served and the
way we
want
to we have to
a
customers the way we think they want to be served and the way we want to we have to have a mass
mass
offering.
and
it starts
with
offering it starts with perishables
perishables
and
and you
know
if
if you
you
if
you
look
at
the
total
spend
per
household, we
you know,
when
we look
you look at the total spend per household
at
the the
difference
between the
total amount
of
spend that
we
we look at the difference between the total amount of spend that we
think
think
are
consumers and
customers
are
spending
on
items
that
we
could
serve
our consumers and customers are spending on items that we could
them
on
versus what
they spend on
spent
us.
the biggest
difference is that they're not going to be able
is
serve them on versus what they spend on us the biggest difference is grocery
grocery.
and and you
know and in a
lot of
your
shops are a lot of
a
lot
of
grocery
and and you know like and in a lot of your shops a lot of grocery
starts
with
perishables
and
so we we
starts with perishables and so we we are
are we really
are
excited that we're going to be able to do
we feel
like
we
found
something
with
shipping
perishables out
of
our
we really are excited that we feel like we found something with
same-day
day
facilities.
You know, we've grown
shipping perishables out of our same day facilities
we've grown our
our
everyday
essentials about
three
times
faster than the rest of the
our
store.
everyday essentials about three times faster than the rest of our store
It
represents
about
half of
our
units
now. If I look at all
the
everyday
it represents about half of our units now if i look at all the everyday essentials
essentials.
what we find
is
customers
who
shop
what we find is customers who shop perishables
perishables
through
our same day.
delivery, they
buy
about
seven
times
more every day.
essential
through our same day delivery they buy about seven times more everyday
units than
those that
don't.
So again, if you're trying
to
close
that
gap
between what
essential units than those that don't again if you're trying to close that gap
consumers
spend
overall and
the
items
that
we can
provide
versus
what they spend
with
between what consumers spend overall and the items that we can provide versus what they
spend with us
us
perishables has
a
huge
impact
on
that.
we also
see
perishables has a huge impact on that we also see that
that our
grocery
customers
our grocery customers shop
shop about
four
times
more.
non-grocery
categories.
like home
at four times more non grocery categories
and
apparel a
bunch of
other
categories and spend
about
two
times
more
on
like home and apparel and a bunch of other categories
those
categories compared to the
those
who
don't
use
for
more on those categories compared to those who don't use us for
gross
grocery so
So those
are big
differences, and we
believe that have to do
the
progress we're
making
on
perishables
and
those are big differences and we believe that the progress we're making on perishables
grocery is going to
ultimately lead to the best of the
more you
know being
more
relevant to
customers for
more
of their
and grocery is gonna ultimately lead to more you know being more relevant
shopping
to customers for more of their shopping missions
missions.
Thank
you.
Our next
question comes from
the
line
thank you our next question comes from the line of
of
Eric
eric sheridan
Sheridan
with Cold
Goldman
with goldman sachs
Sachs.
Please
proceed with
your
please proceed with your question
question.
Thanks so
much,
for
taking
the
question.
Maybe a
two-parter
on
market
thanks so much for taking the question maybe
opportunities
within
AWS.
a two parter on market opportunities within
First, you know, with
respect
to
bedrock,
what
have been
your
key
aws first with respect to bedrock
learnings
about the
market
opportunity
around Bedrock?
and
how
what have been your key learnings about the market opportunity around bedrock
it
might
continue
to
scale in
the
years
ahead.
And then
with respect to the fact
and how it might continue to scale in the years ahead
decision to sell
teranium
externally,
how do you think it's a good
and then with respect to the decision to sell trainium externally
about
balancing
the
market
opportunity
of
external
sales
relative to
the
how do you think about balancing the market opportunity of external sales
need
for
compute.
for
that
opportunity relative
to other
relative to the need for compute for that opportunity relative to
opportunities
broadly
across
both
internal
use
cases
and
AWS. Thanks so
other opportunities broadly across both internal use cases
and aws thanks so much
much.
Yeah. On the bedrock.
side,
yeah on the bedrock side
you
know,
I would tell
you
you've
probably
heard
this
from
us
multiple
you know i would tell you you've probably heard this from us
times over the
last few
couple of
years
but one of
the
lessons
that
we
multiple times over the last couple of years but one of the lessons that we
we've
learned
we've learned
um
you
know, I'll
say
for
20 plus.
years, you
in
i'll say for twenty plus years in offering
offering
technology
to
customers.
is that
there
is
technology to customers is that there is not
not
one
tool
to rule the
one tool to rule the world
world.
People
always
assume
that
whatever
is in
the
lead
early
on is going to be a good
the
only
people always assume that whatever is in the lead early on is
thing
or
things that
people
use and
it's
never
the
case. It's not
true
gonna be the the only thing or things that people use and it's never the case
in
database it hasn't
been
true in
analytics.
In the beginning of
AI,
everyone
said the
it's not true in database it hasn't been true in analytics in the beginning of ai everyone
only
framework
people
use
is
TensorFlow. It turns
out you
know,
said the only framework people use is tensorflow it turns out you know
PyTorch is
much
bigger
now, and
so
it's, and
not going to
be
true
pytorch is much bigger now so it and it's not gonna be true
with
models
either.
you know in you
I'll say in
the
next two
with models either you know in you know i'll i'll say in the next
to
three
years, I
think they're going
gonna
to
be
six
to
eight
models that
are
about
as good
each
two to three years i think they're gonna be six to eight models that are about as good as each other
other.
or at least
good
enough
for
95 plus
percent of
the what the
workloads.
and some
will
be better at
or at least good enough for ninety five plus percent of the with the workloads and
reasoning
and some will be better at
at
coding and some will be better at
at
some will be better at reasoning and some will be better at coding and
visual
um
pieces and
some will
be
lower
latency
and
will be better visual pieces and
some will
be
lower
cost.
and
some will be lower latency and some will be lower cost and most
most
customers are going
to
use
multiple
models and
many will
use multiple
models
in the
same
customers are gonna use multiple models and many will use multiple models in the
generative
AI
application.
And so what
customers
really want to do is that we're going to have
do
want
same generative ai application and so what
do, and
we
see
this
validated
over and
over again when
customers really wanna do and we see this validated
we
talk to
customers
over and over again when we talk to customers is
is they want
a
they want a service
service that
has
really
broad
selection of
those
frontier
models and that
has
very
good
price
that has really broad selection of those frontier models
performance
and it
has
very
strong
and it has very good price performance and it has very strong
security and
access
control and they
want
that
service so that
they
can
kind
of
security access control and they want that service so that they can kind of
decide
what kind of
combination of
models they
want to
use.
and the
to swap them
back
and
forth as
they
decide what combination of models they wanna use and then swap them back and forth as they leap
leapfrog each
other as
different
constraints.
of
their
applications
require
them.
frog each other as different constraints but their applications require them
And that's what
we see
with
Bedrock.
people
are
very
excited
about
it um
and that's what we see with bedrock people are very excited about it
we
we have
have.
you know we
have both
closed
models
and
models
like...
we have both closed models and models like
anthropic
and OpenAI.
ais models we
have
open
models
with
Kimmy
and
GLM and
anthropic and openai's models we have open models with kimi and glm and others
others.
I think
the
Western
world
is
very
hungry
for
i think the western world is very hungry for
additional
open
models that
are
Western open
models and so
additional open models that are
I
believe
that will
happen over
time as
well but I
think
that
western open model and so i believe that will happen over time as well but i think that
the
size
of
the
the size of the opportunity
opportunity
in
bedrock.
is
in bedrock is
gigantic.
and it
could
be a
service as
large
ec2 which
is
a
very large
service
gigantic and it could be a service as large as ecc
today in
AWS.
So I think it's a very good
large.
which is a very large service today in aws so i think it's very large
on
On the balance
of
chips
on the balance of chips
in
what
you
sell
externally
versus
what
you
use inside
your
cloud.
it's a very good
what you sell externally versus what you use inside your cloud
question.
and it's a
question
that
we're
continuing
to
a very good question and it's a question that
evaluate
as
we
speak.
I would say
that
the
number of people that are going to be able to do
we're continuing to evaluate as we speak
number
of
i would say that the number of
companies
companies
who
have
who have
a
a
significant
cloud
business
and
a
chip
strong
enough to
sell
significant cloud business and a
externally
is
effectively
two.
chip strong enough to sell externally is effectively two
So there really
aren't
many
customers that
have
to
grapple
with
the
type
of
problem at this
so there really aren't many customers that have to grapple with the same type of problem at this
type
of
scale.
type of scale and
And at this
at this point
point,
everybody's going to be able to do
is
producing
their
advanced
chips with
the
same
everybody is producing their advanced chips
provider.
There's only so many
chips
that
provider can
provide
each
with the same provider there's only so many chips that provider can provide each year
year.
Everybody gets
an
allocation.
and you
have
to
decide what
that
allocation
everybody gets an allocation and you have to decide with that allocation
how
much of it you
want
to
how much of it you wanna sell
sell
externally and how
much of
it you want to
use in your
cloud.
And there's a
trade-off you
externally and how much of it you wanna use in your cloud and there's a trade off you know if you
know, if you sell
externally, you're able
to
realize
more
revenue in
the short
sell externally you're able to realize more revenue in the short
term
because you
get
to
recognize the
revenue
as soon as you
it leads to
leaves
your
inventory.
term because you get to recognize the revenue as soon as it leaves your inventory
and
And on the flip
on the flip side
side, if you decide
to do
use
it
inside
your
if you decide to use it inside your cloud
cloud
in
the
form
of
EC2
instances or
bedrock
in the form of ec two instances or bedrock
you
actually
will
end
up
driving
more
absolute
revenue
and
free cash
flow from
those
actually will end up driving more absolute revenue and free cash flow from those chips
chips because you
get
to
use
them
over, you
know
five
to
six
years.
and
drive
revenue
because you get to use them over you know five to six years
for a long
longer
period of
time.
So it
is
um you
have
to
and drive revenue for a longer period of time
really
think
through what
you
want to
do
date i would
say that
we've
taken
it is you have to really think through what you want to do
a
different
approach in
how we're going to do
we've
used
our
chips than
to date i would say that we've taken a a different approach in how we've used our chips
the
other
provider
who
has
this
same type
of
balancing
act going
than the other provider who has the same type of balancing act going on
on.
and you
know,
as I
mentioned
as i mentioned earlier
earlier,
uh we
believe
we're going to be able to do
have
a
very
significant
business
selling
chips
externally and we're going
we believe we're going to have a very significant business
to
start in
late
twenty twenty
and
we will
selling chips externally and we're going to start in late twenty twenty seven
be
thinking
through
that
balance, I
and we will be thinking through that balance i think
think,
probably
every
probably every year
year.
But they'll
both
be
very
significant
that our our
ability to
but they'll both be very significant our
create
price
performance
scalable
chips is going
our ability to create price performance scalable chips
to
be
a
very
significant
strategic
advantage for
us.
at
is gonna be a very significant strategic advantage for us
scale
both
in our
own
cost
structure as
well
in
building
a
separate
business and
selling
at scale both in our own cost structure as well as in building a separate business
external
chips and
selling
external chips
really
is
a
a very different
business
than
your
cloud
selling external chips and selling external chips really is a very different business than your cloud
infrastructure
infrastructure business
business.
Thank
you.
Our next
question comes from
the
line
of
Doug
thank you our next question comes from the line of
Anmuth
with
J.P.
doug anmuth with jpmorgan
Morgan.
Please
proceed
with
your
please proceed with your question
question.
Thanks for taking the
questions.
When you
think
about
the
40%
plus
thanks for taking questions when you think about the forty percent plus
AWS
revenue
growth each
of
the next
two
years and then
the
multi-year
path
beyond
aws revenue growth each of the next two years and then the multi year path beyond that
that.
Can you
just
talk
about
the
CapEx
required to
drive
that kind
of
can you just talk about the capex required to drive that kind of revenue
revenue.
over the next
couple of
years and
beyond.
And then also,
Andy,
any
updates
over the next couple of years and beyond and then also andy any
just to how
you're
thinking
about
the
duration
of
returns
on
both
updates just to how you're thinking about the duration of returns on both
servers and
networking and
then
also
data
servers and networking and then also data centers
centers.
thanks
Thanks.
Yeah.
I'll take
them
in
reverse
order.
Uh so
on
yeah i'll take them in reverse order so
um
the
break
on
our
infrastructure.
as I
mentioned in
my
the breakeven on our infrastructure
opening
comments
we're
continuing
to
move
that
left.
we're continuing
to
as i mentioned in my opening comments we're continuing to move that left
make
that
shorter.
There, you
we're continuing to make that shorter
know there
are a lot
of
you
cores, a little bit
different
from AI.
a little
bit
different
from
how
are a lot of cores little bit different from ais
you
finance
these
things.
And so it
varies depending
on
what you're talking
bit different from how you finance these things and so it it varies depending on which you're
about, but
we're
continuing
to
make
progress as we
historically
have been
pretty
good
at
doing if
you
think
talking about but we're continuing to make progress as we historically have been pretty good at doing if you think
about
AWS at
finding
ways
to
extend
useful
lives
and
about aws at finding ways to extend useful lives and to
to
make
the
break
even
sooner and we're
making good
progress
there
too.
on
make the break even sooner and and we're making good progress there too
the
on the
you know, on the on the
capex
involved to
grow
the
way
we're
talking
about,
it's
meaningful.
on the capex involved to grow the way we're talking about it's meaningful
you know and and uh you
know i
think that
this the
way
we
think about
it
Doug, is
and i think that this the way we think about it
doug is that
that
this
is
a
once in
a lifetime
opportunity.
You know, I think what
we're
this is a once in a lifetime opportunity
seeing with AI.
it's
the
biggest
transformation in
our
i think what we're seeing with ai it's the biggest transformation in our lifetime
lifetime.
And
and
if you
know the
idea
of
being able
to
grow
39%
if you know the idea of being able to grow thirty nine percent
with
$184
billion
annual run
with one hundred and eighty four billion dollars annual run rate
rate and to
grow
40% a
year
on
top of the
that
in you
know each
of
the
next two
and to grow forty percent a year on top of that in each of the next
years and the
they ultimately end
two years and they ultimately end up
up
as
a
trillion
dollar plus
business.
we're going
to
invest
as a trillion dollar plus business
to
continue
being the
leader.
We are the
leader
we're gonna invest to continue being the leader we are the leader today
today.
in
in
you know, the, I'll call
it
the
infrastructure
and
AI
space.
the i'll call it the infrastructure and ai space and
and um
you know would
it
be
more
convenient?
would it be more convenient
if
this
type
of
acceleration and
opportunity is a very important
happened
over 20
25
if this type of acceleration and opportunity
years and
you
could
spread
the
capex
over 25
opportunity happened over twenty five years and you could spread the capex over twenty five years
years.
Yeah, it might be a
more
convenient but
that's
not the
world that we
live
in and
that's not
the
yeah it might be more convenient but that's not the world that we live in and that's not the opportunity
opportunity.
and
um and
we
and we
we
can
fund
this
we can fund this plan
plan.
um and I think it
will
forever
change
the
size of
Amazon.
It will ever
and i think it will forever change the size of amazon will ever change
change
it will forever
change
our
revenue.
It will
forever
change our
free
cash
flow, and
our revenue it will forever change our free cash flow
we're going
to
invest and
we're going
to
pursue
it to
continue
be
to the
significant
leader like we
are
and we're going to invest and we're going to pursue it to continue to be the significant leader like we are today
today.
Thank
you.
thank you
And our final
question comes from the
line
of
Ross
Sandler with
and our final question comes from the line of ross sandler with barclays
Barclays.
Please
proceed with
your
please proceed with your question
question.
Great.
Yeah, I thought I'd
double
down
great yes thought i'd double down on
on the
bedrock.
question.
So the
token
marketplace on
Bedrock
the bedrock question so the
seems
to
be one of the most
these hot the
hottest
services
token marketplace on bedrock seems to be one of these the hottest services
in
AI
right
in ai right now
now.
And our understanding
is more
the majority of the
these
workloads
and our understanding is the majority of these workloads are
are
running
on
running on trainium
tranium.
So is
this
becomes a
bigger
part of
the
overall
AWS
story,
so as this becomes a bigger part of the overall aws story
like you just
mentioned,
Andy, how
might
like you just mentioned andy how how might that
that
impact
both
revenue
growth, but
impact both revenue growth but especially
especially
margins at
AWS as you kind of
shift
margins at aws as you kind of shift from
from
selling
bare
metal
to
selling
selling bare metal to selling more
more
inferences as
a
service could
you just talk
about
that? Thank
inference as a service could you just talk about that thank you
you.
Yeah.
uh
yeah well
well you
know,
you're
right
that
the
you're right that the
majority of
um
majority
and
most
of bedrock
day.
is
being
run
on
top
of
tranium
and most of bedrock day is being run on top of trainium
and
we we
do
that
in
meaningful
part
because
we
really love
and we do that meaningful part because we really like
like
um
the
price
performance that
we're going to be
getting and
it
allows
us
to
the price performance that we're getting and it allows us to keep
keep to
both
keep
prices as low
as
possible
for
customers
as
well
to both keep prices as low as possible for customers
as
our
ability
to you
know, we'd
love
like
as well as our ability we like the
the
margins
associated
with
it you
know
if you think
about
margins and
in the
cloud
the margins associated with it if you think about
space and you're looking
at
different
players
and and
margins in the cloud space and you're looking at
how you
know what
their
costs
structure
looks
different players and what their cost structure looks like
like
There are a few
things to
pay
attention
to you know
the
first
there are a few things to pay attention to the first is
is for
their
data
for their data centers
centers,
how
many
of them
are
they
actually you
know,
how many of them are they actually do you know
buying or
long
buying or long leasing
leasing
versus
versus
to
colo
or
neoclass.
i mean
neoclouds
are
about
3,500 basis
doing colo or neo clouds i mean neo clouds are about
points worth
worse
and
in
operating
margin
thirty five hundred basis points worse in operating margin
than
if
you
long
lease
them.
than if you long lease them so
So, you know, and
then
you
look
then you look at
at
you
what
is
the
hard
on top of
what is the hardware on top of
which they're
running
and you know
the
i
which they're running and you know the if
if
if
if you're
you're if
you
use
you're using
using um
the
hardware
that
everybody
else is
the hardware that everybody else is using
using.
you'll
have
a
comparable
cost
structure
to
what
everybody
is
doing and if you
you'll have a comparable cost structure to what everybody is doing
have
the
ability
to
use
and if you have the ability to use
hardware
that's
different, you'll
hardware that's different
have
an
advantage.
and so I think when
you when you
look
at
what
we're
doing most of the
'll have an advantage and so i think when you when you look at what we're doing
our
capacity
most of our capacity is
is
either
owned
or
long.
long
leased which
is, you
know
either owned or long long leased
um
it
enjoys
better
operating
which is you know
margins
than
what you
you'll find
when
people are
mostly
doing
colo or
neo
enjoys better operating margins than what you'll find when people are mostly doing
or big
chunk
doing
colo or
neo
And the fact
that
colo or neo or a big chunk doing colo or neo
we're
running
on top
of
our
and the fact that we're running on top of our own
own
chip
that's
providing
chip that's providing
both
both
uh
advantage
price
performance
advantage price performance
and
it's
more
cost
effective for
ourselves
because
we
own
it.
I think gives
and it's more cost effective for ourselves because we own it
us
some
structural
cost
advantages that
I think
are going
to
be
very
helpful
to
i think gives us some structural cost advantages that i think are going to be very helpful
customers as we
pass them
back
to
customers and
helpful to
the
overall
economics
of
customers as we pass them back to customers and helpful to the overall economics of aws
AWS.
Thanks for joining
us for
the
call
today and for your
thanks for joining us for
questions.
A replay
will
be
available on
our
Investor
Relations
website for at least a
three
the call today and for your questions a replay will be available on our investor relations website for at least
months.
We appreciate
your
interest in
Amazon
and look at
forward to the
speaking with
you
again
next
three months we appreciate your interest in amazon and look forward to speaking with you again next quarter
quarter.
Mm-hmm.
Mm-hmm.
Uh
Yeah,
I'm not sure if I can do it.
Mm-hmm.
Ba duna Ba ba ba
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