Amazon.com, Inc.

Thank you for standing by. Good day, everyone, and welcome to the Amazon.com First Quarter 2025 Financial Results Teleconference. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question and answer session. Today's call is being recorded. And for opening remarks, I will be turning the call over to the Vice President of Investor Relations, Mr. Dave Files. Thank you, sir. Please go ahead.

Hello, and welcome to our Q1 2025 Financial Results Conference Call. Joining us today to answer your questions is Andy Jassy, our CEO, and Brian Olsowski, our CFO. As you listen to today's conference call, we encourage you to have our press release in front of you, which includes our financial results, as well as metrics and commentary on the quarter. Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2021. Your questions reflect management's views as of today, May 1st, 2025 only, and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings. During this call, we may discuss certain non-GAAP financial measures. In our press release, slides accompanying this webcast and our filings with the SEC, each of which is posted on our IR website. You will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures. Our guidance incorporates the order trends that we've seen to date and what we believe today to be appropriate assumptions. Our results are inherently unpredictable and may be materially affected by many factors, including fluctuations in foreign exchange rates, changes in global, economic, and geopolitical conditions, tariff and trade policies, and customer demand and spending, including the impact of recessionary fears, Inflation, interest rates, regional labor market constraints, world events, the rate of growth of the internet, online commerce, cloud services, and new and emerging technologies, and the various factors detailed in our filings with the SEC. Our guidance assumes, among other things, that we don't conclude any additional business acquisitions, restructurings, or legal settlements. It's not possible to accurately predict demand for our goods and services, and therefore, our actual results could differ materially from our guidance. And now, I'll turn the call over to Andy.

Thanks, Dave. Today we're reporting $155.7 billion in revenue, up 10% year-over-year, excluding the impact from foreign exchange rates. Operating income is $18.4 billion, up 20% year-over-year, and trailing 12-month free cash flow is $25.9 billion. We're pleased with our continued business progress, but more importantly, with our pace of innovation and additional improvement in our customer experiences. In our stores business, we once again saw strong consumer resonance in our continued work on selection, value, and shipping speed. Our broad selection offers customers choice across their shopping journeys. We welcome well-known brands such as Aura Rings, Michael Kors, and The Ordinary, as well as a new shopping experience with Saks that offers a refined luxury assortment of fashion and beauty items from brands like Dolce & Gabbana, Balmain, Urdum, Giambattista Vallee, and Jason Wu Collection. As always, we're working to keep prices low. And with this being an uncertain moment for consumers, it's even more important than it typically is. In Q1, we held deal events worldwide to help customers save over $500 million across the big spring sale in the U.S. and Canada, spring deal days in Europe, and Ramadan Eid sale events in Egypt, Saudi Arabia, Turkey, and the UAE. Prime members will have more opportunities to save throughout the year, including at our 11th Prime Day event in July. Over the past few years, we've made significant progress in making our fulfillment network more efficient and cost-effective. We've shared many times that an important turning point was regionalizing our national fulfillment network into regional hubs. By stocking items closer to where customers live, we're able to deliver more orders faster, often in fewer packages, and at lower delivery costs. The next challenge was getting as many items as possible into these regional nodes. Our inbound network, which is how we get items to each fulfillment center, hadn't been architected to leverage this new regionalization structure. So we redesigned it and just rolled out a new inbound architecture that expands the share of products that we can place in each fulfillment center, improving delivery speeds and lowering our cost to serve. In the first quarter, we once again set new delivery speed records with our fastest delivery ever for Prime members around the world, and we delivered more items in the same day or next day in Q1 than any other quarter in our history. Looking ahead, we'll continue to refine our newly redesigned inbound network, build out our same-day delivery sites, and add additional robotics and automation throughout our buildings. You'll also see us expand the number of delivery stations that we have in rural areas of the U.S. so we can get items to people who live in less densely populated areas much more quickly. I thought I'd share a few thoughts on the prospect of heightened tariffs on our stores business. Obviously, none of us knows exactly where tariffs will settle or when. We haven't seen any attenuation of demand yet. To some extent, we've seen some heightened buying in certain categories that may indicate stocking up in advance of any potential tariff impact. We also have not seen the average selling price of retail items appreciably go up yet. Some of this reflects some forward buying we did in our first-party selling, and some of that reflects some advanced inbounding our third-party sellers have done. But a fair amount of this is that most sellers just haven't changed pricing yet. Again, this could change depending on where tariffs settle. Amazon is not uniquely susceptible to tariffs. As it relates to China, Retailers who aren't buying directly from China are typically buying from companies who themselves are buying from China, marking these items up, rebranding, and selling to U.S. consumers. These retailers are buying the product at a higher price than Chinese sellers selling directly to U.S. consumers in our marketplace, so the total tariff will be higher for these retailers than for China direct sellers. It's also sometimes easy to forget what Amazon sells. We're not mostly selling high average selling price items, though we certainly sell a bunch. In the first quarter, our everyday essentials grew more than twice as fast as the rest of our business and represented one out of every three units sold in the U.S. on Amazon. Even if you exclude Whole Foods Market and Amazon Fresh, Amazon is one of the largest grocers in the U.S. with over $100 billion in gross sales last year. People are buying a lot of their everyday essentials at Amazon. We also have extremely large selection, hundreds of millions of unique SKUs, which means we're often able to weather challenging conditions better than others. When there are periods of discontinuity, substantial unexpected product trends emerge. Think about the pandemic when items like masks and hand sanitizer became big sellers. When you have the broadest selection like we do and 2 million plus global sellers like we do, you're better positioned to help customers find whatever items matter to them at lower price points than elsewhere. Finally, when there are uncertain environments, customers tend to choose the provider they trust most. Given our really broad selection, low pricing, and speedy delivery, we have emerged from these uncertain eras with more relative market segment share than we started and better set up for the future. I'm optimistic this could happen again. Moving to a few words on Amazon ads. We're working hard to be the best place for brands of all sizes to grow their business. We are pleased with the strong growth on a very large base, generating $13.9 billion of revenue in the quarter and growing 19% year-over-year. We're seeing strength across our broad portfolio of full-funnel advertising offerings that help advertisers reach an average ad-supported audience of more than 275 million in the U.S. alone. This includes our top-of-funnel efforts to drive brand awareness to bottom-of-funnel offerings where we measure outcomes at the point of conversion. Amazon Ads provides brands with tools to reach targeted audiences in our own entertainment properties such as Prime Video, Twitch, and IMDb, in live sports such as NFL, NBA, and NASCAR, audio content such as Amazon Music and Wondery, and of course in our store, as well as many other external sites such as Pinterest and BuzzFeed. All of our audience and measurement capabilities work for the ads we deliver across premium third-party publishers through Amazon DSP, and our secure clean rooms provide advertisers the ability to analyze data, produce core marketing metrics, and understand how their marketing performs across various channels. We continue to see a lot of opportunity to further expand our full funnel capabilities for brands. AWS grew 17% year-over-year in Q1 and now sits at a $117 billion annualized revenue run rate. We continue to help organizations of all sizes accelerate their move to the cloud, helping to modernize their infrastructure at lower cost and speed up innovation. We signed new AWS agreements with companies including Adobe, Uber, Nasdaq, Ericsson, Fujitsu, Cargill, Mitsubishi Electric Corporation, General Dynamics Information Technology, GE Vernova, Booz Allen Hamilton, NextEra Energy, Publicis Sapient, Elastic, NetSmart, and many others. It's useful to remember that more than 85% of the global IT spend is still on-premises, so not in the cloud yet. It seems pretty straightforward to me that this equation will flip in the next 10 to 20 years. Before this generation of AI, we thought AWS had the chance to ultimately be a multi-hundred billion dollar revenue run rate business. We now think it could be even larger. If you believe your mission is to make customers' lives easier and better every day, and you believe that every customer experience will be reinvented with AI, you're going to invest very aggressively in AI, and that's what we're doing. You can see that in the thousand plus AI applications we're building across Amazon, You can see that with our next generation of Alexa named Alexa Plus. You can see that in how we're using AI in our fulfillment network, robotics, shopping, prime video, and advertising experiences. And you can see that in the building blocks AWS is constructing for external and internal builders to build their own AI solutions. We're not dabbling here. We're very intentionally giving builders the broadest possible capabilities at every level of the AI stack, cost-effectively, to use AI expansively across their businesses. At the bottom layer for those building models, our new custom AI chip, Tradium 2, is starting to lay in capacity in larger quantities with significant appeal and demand. While we offer customers the ability to do AI in multiple chip providers, and will for as long as I can foresee, customers doing AI at any significant scale realize that it can get expensive quickly. So the 30% to 40% better price performance that Tranium 2 offers versus other GPU-based instances is compelling. For AI to be as successful as we believe it can be, the price of inference needs to come down significantly. We consider this part of our mission and responsibility to help make it so. At the middle layer, for those wanting to leverage frontier models to build generative AI apps, Amazon Bedrock is our fully managed service that offers a choice of high-performing foundation models with the most compelling set of features that make it easy to build high-quality generative AI applications. We continue to iterate quickly on Bedrock, adding Anthropix Cloud 3.7 Sonnet Hybrid Reasoning Model, their most intelligent model to date, and Meta's Glamour 4 family of models. We were also the first cloud service provider to make DeepSeq R1 and Mistral AI's PIX4Large generally available as a fully managed model. And of course, we offer our own Amazon Nova state-of-the-art foundation models in Bedrock with the latest premier model launching yesterday. They deliver frontier intelligence and industry-leading price performance, and we have thousands of customers already using them, including Slack, Siemens, Sumo Logic, Coinbase, FanDuel, Glean, and Blue Origin. A few weeks ago, we released Amazon Nova Sonic, a new speech-to-speech foundation model that enables developers to build voice-based AI applications that are highly accurate, expressive, and human-like. Nova Sonic has lower word error rates and higher win rates over other comparable models for speech interactions. The technology world is also abuzz about the potential of agents. To date, virtually all of the agentic use cases have been of the question-answer variety. Our intention is for agents to perform wide-ranging, complex, multi-step tasks, like organizing a trip or setting the lighting, temperature, or music ambience in your house for dinner guests, or handling complex IT tasks to increase business productivity. There haven't been action-oriented agents like this until Alexa Plus, but the technology to build these agents is still quite primitive, inaccurate, and requires constant human supervision. We've just released a research preview of Amazon Nova Act, a new AI model trained to perform actions within a web browser. It enables developers to break down complex workflows into reliable atomic commands like search or checkout or answer questions about the screen. It also enables them to add more detailed instructions to these commands where needed, like don't accept the insurance upsell. NOVA Act aims to move the current state-of-the-art accuracy on multi-step agentic actions from 30% to 60% to 90% plus with the right set of building blocks to build these action-oriented agents. At the very top of the stack are the applications. This past quarter, Amazon Q, the most capable generative AI-powered assistant for accelerating software development and leveraging your own data, launched a lightning-fast new agentic coding experience within the command line interface that can execute complex workflows autonomously. Customers are loving this. We also made generally available GitLab Duo with Amazon Q, enabling AI agents to assist multi-step tasks such as new feature development, code-based upgrades for Java 8 and 11, while also offering code review and unit testing all within the same familiar GitLab platform. Our AI business has a multibillion-dollar annual revenue run rate, continues to grow triple-digit year-over-year percentages, and is still in its very early days. While there is good reason for the high optimism about AI, I conclude my AWS comments with a reminder that there is still so much on-premises infrastructure yet to be moved to the cloud. Infrastructure modernization is much less sexy to talk about than AI, but fundamental to any company's technology and invention capabilities, developer productivity, speed, and cost structure. And for companies to realize the full potential of AI, they're going to need their infrastructure and data in the cloud. I want to briefly mention a few other items. As I've referenced a couple times in Q1, we introduced Alexa Plus, our next generation Alexa personal assistant who's meaningfully smarter and more capable than her prior self, can both answer virtually any question and take actions, and is free with Prime or available to non-Prime customers for $19.99 a month. We're just starting to roll this out in the U.S., and we'll be expanding to additional countries later this year. People are really liking Alexa Plus thus far. We're excited and honored to be part of the joint venture that will be creating the next generation of the esteemed James Bond film franchise. We recently named acclaimed producer Amy Pascal and David Heyman to produce the next James Bond movie. Additionally, just a couple days ago, Project Kuiper reached a significant milestone by launching our first satellites into orbit, with more being launched soon, and we expect to begin offering service to customers later this year. I'm proud of what our teams around the world have delivered. We're excited about what we're inventing and working on as we speak, and with that, I'll turn it over to Brian for a financial update.