AMZN - Earnings call transcript Q2 2018

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Operator

Thank you for standing by. Good day, everyone, and welcome to the Amazon.com Q2 2018 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.

be Relations, call Dave I'll Director to remarks, Investor of Fildes. opening turning over the the For Please go ahead?

Dave Fildes

Hello, and call. financial results welcome to our QX XXXX conference

Olsavsky, today CFO. us to your is Joining answer Brian questions our

against today's conference release all Please results results note, the XXXX. press of our as As you as front will in listen call, encourage this and have in our you includes which comparable stated, quarter. metrics the unless comparisons period we call you, well otherwise our to financial be for on to commentary of

and Our Actual views only, results July to and comments of XXXX materially. differ responses management's your questions XX, statements. may as reflect will forward-looking include today,

and factors impact filings. SEC, could potentially the about annual is including our our information most included on that subsequent filings press and our Form XX-K recent with results Additional release report financial in today's

the accompanying is non-GAAP you release, During additional these and measures, our may our comparable this call, disclosures measures GAAP of will we including with with press each certain non-GAAP In IR measures. these this regarding website, webcast on measures. our SEC, financial of slides find discuss reconciliations filings posted which

the to and seen that trends we believe what today Our we've incorporates be guidance order assumptions. appropriate to-date

Internet, spending, inherently customer Our with the commerce world foreign factors, and including events, our exchange factors filings materially rate and fluctuations online unpredictable detailed results and the affected various the are growth in economic cloud global rates, be may by SEC. the of conditions in many services, changes and of in

we'll possible actual differ or services, listeners to our additional Q&A. initiate please among legal how our that and the demand and that, to business restructurings for move Operator, question. investments, guidance. materially conclude to therefore, assumes, don't predict things, a any other also our With our could guidance accurately Our settlements. remind from results It's not goods acquisitions, we

Operator

we for now the up open questions. At this call will time,

from of with question. Merrill Lynch. comes your Justin Please the question Post from first Our line proceed

Justin Post

Great. margins. for quarter than metric the I talk to then improved of ad and profitability the your the U.S. the Thank within better Both other International was accelerate line? you for the guess, reasons you. Thank expectations have the And you. quarter? it (XX:XX) Could maybe standout business and about was the year-over-year.

Brian T. Olsavsky

efficiencies Sure, areas. it quarter. quarter, yeah. to saw of for consecutive Advertising had better Thanks, than FX-neutral Justin. accelerating the expected of it in our its our so infrastructure costs, generally fixed some AWS had a Yeah, strength and probably our continued I had XX% third what in growth. most was Elsewhere costs. – also profitable growth. attribute is growth, our of strong operations, – we quarter strong all We

the XX% full team centers our well half year-over-year, XX rates last worked increasing of the in our to You'll the note months data even at the usage plan really our growth run has are again meet more as efficiently, usage X customers; first exceeding to that months, the for rate. our we're centers data capital were leases in although been up flat year it's trailing flat pretty

America, last segment gross lot same also is So it's efficiencies, that's to would the in Even a rapid Internationally, were International an Echo France. factors newer year-over-year. Prime in launch in what Japan starting multiple countries in invest in that, at continuing it's launched we continue to. same and launched make in We've International, I as than for operating Echo advertising in to we I to quarter. continue in is growing a impact while say would in clip the although addition point of on advertising smaller hold. new profit, to North devices the Australia was the India we areas, Alexa and geographies, recently. launch Prime benefits we're of lot countries, to a in Spot frontload launched

continuing invest lot mix also it's and grow, continued then as a of a So efficiencies of on operating fronts. we to –

Operator

Our with next question proceed comes from Mark Mahaney Capital Markets. with question. RBC your Please

Mark Mahaney

things. maybe Hey, two Okay.

little little think, Brian, on tease just efficiencies the side particularly to on is talked expected I it ask stunted sustainable? that out bit Thanks any to negatively more, growth, business? better as limited? particular I growth would things new a color and that than newfound you little there Are XX%, of a that And sorry, the new, normal? retail was in are there of lot. that of kind that a or could unit operations, call Just more bit just a particular that efficiencies you have Or out then the I'm color

Brian T. Olsavsky

Sure.

unit with start growth. Let's

very unit I XX%, strong QX, a rate note, with will we in year against last so that. growth we're did comping So

we Shipping then also Saver As factors. our remember, ASP mix the dropped product and early from or that, there we to you but on $XX; part of year number shift were any Super $XX. back mean, unit threshold the in of to look down figure, growth last there be can if I quarter twice, which $XX differentials

a of we year. saw from in last was particularly bit that there growth, that, So items lower ASP

So that. comping we're

is factor digital Another that content subscription. to moves

they while just Music units calculation. the unit not this very count good Amazon So Kindle successful and and – it's in Unlimited, they're a do transition,

costs in you the and of particularly selection. months, both On different fixed at operations, really Prime the probably that if think that, We of obfuscate there's infrastructure XX selection, you're growth. but and a bit, of increased the cost engagement last by the heads. program, costs, driven a customers addition Prime we're it's as well see the capital So retail going pace to with the third-party of as again things and look pleased increase maybe some numbers like lot Prime,

that fixed So one thing the acquisitions of XX% our we've of trailing count, end XX% month in basis. a June, is that we've of excluding you'll the rate was year-over-year – that, we've second head grown grown half year. down of last notice of growth XX But on stepped the at

a head tech look of investing lot movement we're company. within lot of to count. by So count. where head head we moving a seeing that's growth We're of are There's count our being fueled areas the continuing at

so external less first the need operating created necessarily in hiring trend, of and still that's of we'll don't reset to it We a And long-term that, lot now think the evaluate add we efficiencies, certainly year. was but half this people. where and there

the half of our to leads of So off I there the could the that is, half up first lot test holiday. investment coming was Last cost first investment. think the a be good where of of year year, structure a

less this year infrastructure apparent. count But it's head on back fixed made little more that a look you If and that may be pronounced.

Operator

Thank you.

from your Our Anmuth comes question. line Douglas Please the JPMorgan. next of with question proceed with

Douglas T. Anmuth

to Thanks for question. could. taking Wanted the two, if I ask

center give period sense thinking ahead lot going how the fulfillment utilization, And helps how of of forward? of excitement then acquisition holidays, you your us build build but frame footage First, of Thanks. XQ around typically is Can lower year? the about of opportunity obviously and we you're integration PillPack. efforts, should that there your acquisition, about profit some advance you a a and with then, think and the square good. Can pharmacy a around just rationale out the how secondly the and this out outlook heavy FC is increases strategic

Brian T. Olsavsky

Sure.

be PillPack, but think quarter I'll the clarify probably the footage service but you, I you last hasn't this as will the efficiencies just end we've We On of closed, off what don't have it's next going years, the in in we've we the both anticipate to in say into years, get next yes, last the don't lower it holiday, and deal head XX% some quarter. yet. I years. that XXXX center that's today. a course of at few being last we as back-end year, if for is like two fulfillment have added capacity, built you exceeded majority put number number that today. clarify a of square back, – over the But we'll XXXX. for the of growth, year I'll the two that, in I On

my year, it But right so close I'll to limit expect half second excited. of in now. the the comments We we're

lot a at scale think has really company with customer that, together working they've the with highly I ours. highly-differentiated job companies size the they're that on They're think other can the done great sense the a and We that customer we're experience, to we and well-run in future. a that acquisitions today. them matches of a like of differentiated experience, real obsession we've getting expand for and done. looking Recently, customer

has PillPack all and look the deal think got we So them. and working forward with traits, closing those we to

Operator

Thank you.

with from comes question with next question. Our Mark Citi. your Please proceed May

Mark A. May

of of to of late? this about post you're if give does is On retail confidence robust I reaching Alexa business? you that there on you've wondered growth meaningful discuss seen the bit to number AWS, now Alexa in business Alexa, Thanks. users, type impacting how a a the continue that the ability And for you could more backlog

Brian T. Olsavsky

Sure.

Let are the have accelerated which we're out number We XXX we're new results the was Migration Database customer There and computing like see, business existing analytics AWS We've we an customers of Service. than from artificial contracts business and far this new and machine Things, and with the customers really has areas areas. backlog in with and just that's year. that of new the expansion me using last we're the year; from customers learning, see. migrated are AWS. last very to are Again, of the year, a great accelerated new new and and branching added pace a databases more big. a seeing, Yeah, services signs XX,XXX of seeing serverless so happy record start lot Internet features us. that And three we the see and products database intelligence, quarters,

that, to of strong frankly that essentially We've pace we've reliability we've do and years. than think this at built very the look of for a and and innovation people been and you customer we longer And So set ecosystem. come we've it, us? anyone proven security multiple partner why functionality at demonstrated performance, most when else. It's

continue So deliver to customers. again, we for

customers services use higher itself to the capital new develop Obviously, will performance quarter. efficiency. fluctuate that operating was to continue being a run and this a centers team's The quarter-to-quarter, year-over-year, to part flat We data leases margin features. really and strong ability feedback the in very at from the of

Dave Fildes

related a how business, the devices devices just was good with question are the customers lot of second And Dave. is out to some success the enjoying of think, think, to we're is of I some Day, talked this mean, overall. enjoying I impacting Alexa – and had I happy Prime We customers And and there. hey, success coming those. Yeah. having

customers' having hands. that's to really now of good think, a and and revises come is lot a into more exciting getting I ahead, and So the roadmap of focus those – recent

Operator

Thank you.

comes question the next Terry Please question. with proceed Goldman of Heath Our Sachs. your from line with

Heath Terry

Thank you. Great.

what more How stack you've Just areas business. grow Or new point, spend you then, should mentioned on And seeing level grow? database, basis. you've timing? of CapEx lease, that with those function of growth other about and efficiency seeing sort How the growth? give of expectations CapEx but the longer we referred the year-over-year no overall – you're us customers that some adding AWS successful to focus. there flagged you and growth seeing Is the that on the lease numbers talked case? a customers move you're as to with capital or growth that's what about past as the sense you gotten lease or to a your you where you're spend signals where generally and can customers in you you're In for capital is capital when breakthrough to of infrastructure up AWS, customers potentially about there think a trying the it less flat AWS,

Brian T. Olsavsky

where last the period leases, Sure. just I – a year still added but we lot, we've demonstration flat. the I a of mean, of $X.X say lot growth is of would it's a is very over capital billion rate tight

usage the in see of time it say element The do it. I'm it; do would better spend point about sure investments data more the drive efficiency a expectation our growth been which made sometimes our that efficiencies is, I be, in growth can costs higher We would we exceeding periods. for sometimes starting centers. usage, we've But would very our the we than driving what lot can with in bank We breakthrough and in growth infrastructure the is be prior growth not revenue of the other would efficiently has So – rate. quarters. other start of that

pretty a last expenditures, say growth This would last fluctuate year-over-year XX% XX% are half investment it large in in but first I XX%. of in the first in X% capital So and quarters, in year the QX quarter-to-quarter. numbers year, year, it it in two with area. will was QX was was lump those QX. I'll expenditures, capital QX,

and as large a – side we other a their AWS, business, have conversion have the of start don't in piece, would certainly enterprise to I'd that, play government they had us, small both have businesses infrastructure So start-ups count of bit and all-in here, a anything agencies, on they our chance is their detail, of that and more also customers I gone from to then work have capability, longer-term, structures and build in on you. timing for say see have that a on to from but – the because the shift many cost consumer a we drive think it's there's them infrastructure result. I I efficiency resources. don't just our and AWS at to product overall, number the gone growth savings coming the span customers Amazon to to networks. in AWS to I on lower due and increasingly warehouse category, to in continue

Operator

Thank you.

Our Please question. Stanley. Brian comes proceed your next with from with Morgan question Nowak

Brian Nowak

I taking have two. my for questions, Thanks

of focused And guys customer The lot. on product? we're Thanks. with of give one, advertiser maybe ad some points any still on talk question, you it's particular you wondering, multiple first through quarter the I second us to accounting to points a you've in are know to looking customers, with some examples can accounting, you're the success removing just but Brian, On points some of any lines was asked revenue products always pain And it and business, could of one existing be you pieces? going because revenue pain us about solving address us the friction current the advertising on side? had the the accounting for walk customers sort ad an know the the that had I of just for your moving of I changes the accounting

Brian T. Olsavsky

afterwards chance that but let Yeah, about with talk me start give a Dave to I'll advertising. piece,

well of strong reach conceptually So across fronts. want authors back, us. adoption a dollar We're as now who multi-billion a to vendors, it's Amazon stepping Amazon seeing business sellers, for number as customers. third-party advertisers

make activities to brand of invent say, hundreds So thousands and doing I drive the do, we whether using we're emerging to improvements, a and on advertisers. our advertisers. discovery for purchase that's those of achieve priorities smarter our lot And new on need they're recommendations site. advertisers of improving the advertisers, the would products helping Automating, established automating for customers. tools usability that include to continue points services work for and of to have or our their – awareness, Pain new decisions ultimately marketing to goals our

measurement driving that is be so we're to outcomes direct them positioned And to what properties. on of we're important measurement our benefit advertisers think they're focused also we understand on uniquely capabilities, so their the think We our going advertising. show

Dave Fildes

And Dave. this Yeah. is Brian,

specifically Just QX, related advertising service. other treat accounting we recognition Standards first the the of piece, we on it's the some to to to year, million starting of revenue, Update, $XXX of specifically increase in a part did revenue impact the how the Accounting changes

were the So rather XXXX, you as in remember adoption as sales. advertising part cost the than of certainly of beginning classified revenue services

second in quarter. other million revenue So more is this $XXX

in item, You'd here second which about line $X.X in see is that that the quarter. billion

to digital of of the some of to I shift of gross other sales about a some that, online factors talked some app quarter, in changes for costs, some last and revenue. headwind apps of media treatment the content, net In addition created that stores

that for rate have item for growth change. year-over-year been that that higher, So line would but

Operator

Thank you.

question Sheridan comes next Our proceed UBS. Please Eric question. your from with with

Eric J. Sheridan

the Foods, those the I promote Prime of Whole integration to to if talked within globally, to putting tying in much. Thanks Prime together broader bases the fair Now Prime that prem you customer any you've to On assets way flywheel Whole can. adopt bit? and scale update which about markets closer ecosystem, the how service, the as much. Two what the on scale sort questions on velocity the And users any does you're and continues a terms update in that of SKUs what Now, Foods of of Thank purchasing? so learning of you're so

Brian T. Olsavsky

Sure.

Whole for Prime. quarter big a was savings Foods. Prime Whole and We it for at launched members Foods So, additional

Foods of Whole of Whole to XX% or lot hundreds discounts go yellow you store for items. a you stickers If see Market store, XXX Foods sale of

You popular selected products. on discounts deep also see

it's seasonal So of as this sales. ever of everything said Prime dollars a favorites benefit, members they've benefit, on millions seen rates we've one to have and popular saved for already adopted the Prime fastest from I daily

expanded that's we've addition, XX cities in So picking steam. delivery up grocery so to

membership purchases of During you Foods. Prime Card, lasted had to gives well. customers off save dollars, the been Whole as it ability Whole the And Foods' deals Rewards see because Visa applied incremental the week purchases the for Foods. unique at at which Prime again that Actually, Foods. Whole Day, deals the a had, Prime benefit Prime Whole for some all has on X% And we to at people

of price the other in in is probably the lockers the Amazon the stores, Foods' second and on site, Whole that So the putting previous first wave some calls where wave, after about products initial we drops, talked selling things.

that how have develops. I still multiple So worldwide, big across Whole this is We different that, we'll comments it's keep and the benefits my with level delivery. you milestone XX It – we quarter countries. cities options grocery are than Prime it's think Prime launch it's Foods, X in to see guess, a high. is invention in going, really for we'll Now,

We which have Prime AmazonFresh a services delivery the and serve need. – Now so certain

with we Foods, or Now deliveries then through delivery, Prime new products Foods have as the with combination grocery stores of we're Whole we're using those and with of Go two traditional have experimenting make as We that home a Now and with. Amazon Prime to store Whole now the kind those well

that of innovation, well. invention on lots So as front

Operator

you. Thank

your Our Barclays. proceed comes with Ross Please with question from next Sandler question.

Ross Sandler

evening. Good guys, had two questions. Hey I

Music on business. the is First

subscribers. So I millions you of of think, you recently tens said had paying

in listeners music uptake color the from So second coming is, and coming are improvement Then improving also the International, that parse improvement's the in what's more and in driving markets at of mature from gains on it's margin. Echo? you and the negative, and they can we using question users from Prime, app, in paid retail between paying pretty emerging still converting those it's versus or efficiency operating India markets meaningfully, retail Any If mobile you but into that where Western mentioned some members? so look coming Europe? the other

Brian T. Olsavsky

question. that start Sure, let me with second

more It's starting America. like quite would also I efficient. North improved have internationally. be the last marketing So, just talked growing fixed advertising head yes, of up in more and the is infrastructure and But right. about although internationally margins say count, I that, Europe we in on it's internationally. is to to Japan, many smaller over also like we're seen you're earlier impact costs, and places the efficiencies it I quickly of very few would as show working seeing operating quarters, say things operations costs,

in and – India traction Anniversary, in most have the seen investing good Year India. Anniversary We're Fifth visited obviously, there. Year our invest. our Fifth just as to passed site celebrated We continue We

you're great sellers, has we and for to expansion. continue. also lot that will there's of So and occur that seeing additional consumers innovation continued Indian think But a

in Mexico to Spot and rolling out. Spain. Echo we Italy, Prime and So launched that Echo and Echo Australia; expand to we're devices going in India We Alexa in France. launched Japan, we announced and The Alexa we're soon and

the we're newer would benefits frontload say I geographies. to So that Prime in continuing

that operating to with thing the So see think of we right the issues we that's margin. one do. it's But

are We as well. that front in traction seeing strong

Day; to Singapore, our the also Day, Prime countries this we – expand We Australia, able list like of Luxembourg. year that to Netherlands the were experience that Prime on and

of bullish our we're it's a in So in We business. different on very and countries. do different we're International realize of period growth stages investment

Dave Fildes

this is and Yeah, Dave.

subscription, tens enjoying Just Music, those of you Music grow of paid than it very millions of and and you are to things. playlists, kinds Amazon countries We've of tens continues millions those at of there's quickly stations, on personalized Music. a in look XX the quickly. as offerings the lot customers mentioned, When catalog rich Amazon more got songs, Unlimited of now

course space, for enjoy and Music, Music little move Prime for to a Unlimited they that Prime able earlier way started Amazon think a Music in that, be bit and we to I of then catalog Of members in that's with some been into that the great skill. as enjoy free,

you of is you with the listen part and music. one being wherever just great devices of to also I things that's you Alexa, may using just interacting popular see probably features is imagine are it to alluded that, we for think, Alexa, One able to be most the as of those

to So now think, set. to kind good of XX,XXX to for able a, folks to and that's be proven more available enjoy in skills be have a skill rich growing really than We to customers. Amazon a skill addition I

Operator

you. Thank

Youssef Our SunTrust next question. your comes Humphrey. with Squali Robinson from proceed question Please with

Youssef Squali

very Thank much. you

in you have I state Have charge for On two charge slowdown states do you file the or two XP since or in taxes. maybe taxes is state not you all where began Because taxes? months the these think, collect Supreme started XX those growth a you been guys sellers collecting you. taxes that, and of you any so. And the When for it's states. taxes in you collect to think, do will XP. Thank country, start help understanding last not states my it? decision, will a in you these it states applicable collecting you new was collecting seen XP, in XX I Court to for two rest or

Dave Fildes

Yeah. Hey, Dave. Youssef is this

you tax, that. products as first-party have on own sales collection XX now, mentioned we our that do states state-imposed right So

right For XP sellers it's states. three now,

as X, and recently of So Washington July State April Pennsylvania most X. started X, as on January of Oklahoma

where So we're and the those ones collecting are remitting.

We – to we've of talked about your second said kind haven't trends. not and point any

of still days. early you some are As these really could imagine

Operator

Thank you.

your from Our final with Company. Jason Oppenheimer question question. with comes Helfstein & proceed Please

Jason Helfstein

Thanks.

the thoughts Voice focus on about how to follow would Services, press in release a Prime any third-party about Alexa then replacement? the standard Given offer just plans you skinny become Channels, on monetize Video And cable up Amazon a bundles any to devices? Thanks.

Brian T. Olsavsky

Yeah, let me start with Alexa.

So is right around the reach usefulness. now, expanding emphasis and our the of Alexa

mentioned, now up over So as XX,XXX skills. Dave we're

We and that's have X,XXX have of a XX,XXX – over developer devices network expanded we home brands. smart unique from

allow to devices seeing from name – release few. to into to Ford, where has like with the Acer, Lenovo, And hotel in partnering traveling. a we're Toyota expansion our space that year, Polk, you Hewlett-Packard, in BMW, tripled of Jeff, quote press Alexa number really Sonos, the while was saw Alexa-enabled large hotels the you're so the past You're things experience from like including some companies you

So that's emphasis, is useful. Alexa it getting where places be can the the of expansion to biggest

are to machine traction easily We feel tools new we're developers learning We Alexa great build also there. more getting skills. like developing help

as question it to now your devices can Alexa, biggest original So make that is skills. and was useful about as use the the but I make thing can of monetization think we right possible, do

Dave Fildes

really last we we're on Channels, come think, with We've what traction growth the with I'd Prime pleased future, today, I speculate there. few over the Yeah, question. and mean, we're the can't quarters, some do then in seeing. online seen the might seen channels good and good just some say I on but second I

want it's selection, to focusing clear able Prime to better of that part on option add out even that their to keep customers we'll as So be building because us content memberships. that

Dave Fildes

you of for on your your end us website and will on A with in quarter. least replay for today Investor available our questions. next quarter. to talking the be at look interest appreciate Thanks through and forward Relations joining Amazon, We call again the the

Dave Fildes	Amazon.com, Inc.
Brian T. Olsavsky	Amazon.com, Inc.
Justin Post	Bank of America/Merrill Lynch
Mark Mahaney	RBC Capital Markets LLC
Douglas T. Anmuth	JPMorgan Securities LLC
Mark A. May	Citigroup Global Markets, Inc.
Heath Terry	Goldman Sachs & Co. LLC
Brian Nowak	Morgan Stanley & Co. LLC
Eric J. Sheridan	UBS Securities LLC
Ross Sandler	Barclays Capital, Inc.
Youssef Squali	SunTrust Robinson Humphrey, Inc.
Jason Helfstein	Oppenheimer & Co., Inc.

Amazon.com (AMZN) 26 Jul 182018 Q2 Earnings call transcript