The Results

Revenue strengthened, especially in online and physical stores, which added $3B this quarter and grew 7% y/y. Net Income of $2.87B wasn’t a great story, expecially since about half of this is a favorable impact from Rivian.

Q4 guidance was lower than analyst expectations, and the stock tumbed as shareholders fear Amazon is a barometer for all retail in Q4. Net Revenue continued the trend of mixing from online and physical stores to software and services sales. Amazon is now 54% a services company. Services are very profitable for Amazon, and fast-growing.

Key Takeaways

Amazon’s profit will improve. First, they continue to drive substantial monetizable traffic through streaming media. Lord of the Rings and Thursday Night Football events drew 40M viewers collectively. This means more advertising opportunities and revenue for endemic and non-endemic advertisers.

Second, they are growing into their overbuilt capacity, having delivered $1B in operations improvements and a $10B y/y planned reduction in operations costs annually.

Amazon mentioned continued profitability initiatives. To quote Brian Olsavsky, CFO, “As we’ve done in similar times in our history, we’re taking actions to tighten our belt.” This is an important year for consumer brands to prepare well for annual negotiations.

Check out our video recap with the CPG Guys.