The Amazon.com Third Quarter 2023 Financial Results Teleconference has begun and will feature CEO Andy Jassy and CFO Brian Olsavsky. The call will include forward-looking statements and discussions of non-GAAP financial measures. Additional information about factors that may impact financial results can be found in the press release and SEC filings. The company's guidance reflects current order trends and assumptions.

The results of the company are unpredictable and can be affected by various factors such as economic conditions, customer demand, and new technologies. The current revenue and operating income have increased significantly compared to the previous year. The company has made significant changes to its fulfillment network, resulting in improved customer experiences, lower costs, and increased efficiency.

In the third paragraph, the author discusses the benefits of shorter delivery distances and faster shipping times for customers. This has led to an increase in sales for consumables and everyday essentials. The company has also made improvements in their fulfillment network and inbound processes to further increase efficiency and reduce costs. The author also mentions the growth of AWS revenue and the stabilization of its year-over-year growth rate. Despite some cost optimization, the company continues to see an increase in companies transitioning to deploying new workloads.

The company is seeing an increase in closed deals and new deals signed, with a strong last couple of months of new deals. They have signed several new deals in September that will not show up in Q3 reports, but the collection of which is higher than their total reported deal volume for Q3. The company is investing in generative AI, with three macro layers, and providing updates on their custom silicon for training and inference. They recently announced a partnership with leading LLM maker Anthropic and will collaborate on the development of their Trainium and Inferentia technology to continue delivering price performance advantages for customers.

Amazon has introduced Amazon Bedrock, a managed service that provides access to leading large language models (LLMs) from third-party providers and Amazon's own LLMs. This service allows customers to customize the models using their own data while maintaining security and access control. Meta's Llama 2 model will soon be added to Bedrock, and customers will have early access to future Anthropic models. Bedrock also offers features such as creating agents for tasks and the ability to experiment with different model types and sizes. Customers have had a positive reaction to Bedrock and it is considered a game changer for developers and companies using generative AI technology.

The top layer of the LLMs consists of applications that run on Amazon CodeWhisperer, a generative AI coding companion that has recently gained popularity due to its new customization feature. Customers have been requesting companions that are familiar with their proprietary code bases, and CodeWhisperer has fulfilled that need. AWS is focused on democratizing complex and expensive technology for customers of all sizes and technical abilities. They also prioritize bringing models to customer data rather than the other way around. Many companies, including well-known names like Adidas and United Airlines, are using generative AI apps on AWS. Start-ups like Perplexity.ai have also found success on AWS, and the AWS team will be showcasing new capabilities at their upcoming conference. All of their significant businesses are also working on generative AI applications.

The company is utilizing generative AI in various areas such as product discovery, inventory forecasting, and advertising. They are also improving Alexa's capabilities to become a more intelligent personal assistant. The company is confident in their vision for Alexa and their various businesses are working on implementing generative AI applications. They are also seeing success in their newer initiatives, such as Prime Video being a top driver for customers signing up for Prime.

The company is confident in the potential for Prime Video to be a profitable business, with investments in exclusive content and a marketplace offering including popular channels. Beginning in 2024, there will be limited advertisements on Prime Video, with an option for an ad-free experience for an additional cost. The company is also focused on expanding their e-commerce capabilities, with improvements in international stores and the launch of Buy with Prime, which allows third-party sellers to offer fast payment and delivery options to Amazon Prime members. Recently, the company announced integration with Shopify to make it easier for merchants to manage their businesses.

The paragraph discusses positive responses to Amazon's Supply Chain services and the evolution of their health care services, including the launch of RXPass and partnerships with Blue Shield of California. It also mentions the progress of their satellite initiative, Project Kuiper, and thanks their teams for upcoming events, including the annual AWS re:Invent conference.

In the third quarter, the team is excited to share new capabilities and opportunities with customers. The 29th holiday shopping season has already begun with the successful Prime Big Deal Days event, where Prime members saved over $1 billion. The company aims to make customers' lives easier during the busy holiday season. In terms of financial performance, the company saw a strong increase in worldwide revenue and operating income. North America and international revenue both increased by 11%. The biggest Prime Day event ever was held, with millions of items sold and billions saved by Prime members. Customers remain cautious about price and are spending less on discretionary items.

In the third quarter, Amazon set another record for delivery speed, resulting in increased purchase frequency by Prime members. Third-party sellers grew at 18% year-over-year, and advertising saw a 25% growth, driven by sponsored products and machine learning. There has been a strong improvement in profitability, with North America operating income increasing by $4.7 billion and operating margin improving by 100 basis points. The second full quarter of regionalization within the U.S. has resulted in simplified network and improved connections between fulfillment centers and delivery stations.

The company has been working on optimizing inventory placement and simplification in their regionalized network, resulting in a decrease in cost to serve. They also saw benefits from lower inflation and higher productivity in their international operations, leading to an improvement in operating profit. In AWS, revenues increased by 12% year-over-year and the company added $900 million in revenue. They have seen a slowdown in new cost optimization and are focused on driving innovation and bringing new workloads to the cloud. The company has also made new announcements regarding their approach to generative AI and customization capabilities.

AWS remains a leader in the cloud infrastructure industry, with a strong customer base, large partner ecosystem, and a wide range of functionality. The company's operating income and margin have both increased, driven by improved cost optimization and leverage on head count costs. Free cash flow has also improved significantly, thanks to increased operating income and improvements in working capital. Capital investments for the trailing 12-month period have decreased, but are expected to increase in the future to support the growth of the AWS business.

The speaker discusses the company's readiness for the holiday season and their focus on putting customers first. They also mention their strong inventory and ability to deliver quickly to customers. The speaker then moves on to answering a question about AWS, stating that they have seen a stabilization in year-over-year growth and an increase in revenue. They also mention elevated customer optimization levels but note that it is decreasing. The speaker also highlights the company's strong performance in comparison to other players in the market.

The paragraph discusses the significant cost optimization that customers are making in AWS, such as utilizing Graviton-based EC2 instances and committing to long-term savings plans. The author remains optimistic about AWS in the medium to long term due to its functionality, partner ecosystem, security, customer focus, and potential for growth as more IT spending moves to the cloud.

In the paragraph, the speaker discusses the potential for growth in the generative AI market, stating that AWS has a unique and broad approach that is resonating with customers. They mention the significant number of deals closed in the past few months and the importance of functionality, ecosystem, operational performance, security, and customer satisfaction in these deals. The speaker is optimistic about the future growth of AWS and mentions a 600 basis point improvement in margins driven by headcount reductions and cost control in non-people categories.

The operating margin for AWS is expected to fluctuate quarter-to-quarter. The regional fulfillment network has exceeded expectations and has increased confidence in moving North America beyond mid-single-digit margin levels. There has been a significant change in the network, with more local in-stock levels and shorter transportation distances. The optimization of connections has allowed for quicker delivery. The concern of splitting shipments and having fewer items per box has been addressed.

The company has worked on improving transportation and delivery times, which has led to significant growth in everyday essentials and consumables. The generative AI business is also growing rapidly, but the company believes that the cloud and generative AI are still in the early stages and there is potential for even more growth in the future. Companies are still figuring out how to use generative AI for large-scale production.

AWS is seeing interest in their AI products, particularly in the areas of generative AI. However, there are still some pain points and hurdles that they are looking to address in the coming years. In terms of their retail business, they have made efforts to regionalize warehouses and improve efficiency, but there is potential for even higher profitability with the implementation of robotics in warehouses.

Andrew Jassy discusses the success of Amazon's AI product, Bedrock, which has gained early traction and excitement from customers. He explains that AI has made significant advancements in the past few years, but it is still complicated for everyday developers to use. Bedrock simplifies this process and offers exclusive access to models and customization tools. Jassy also mentions the popularity of Amazon's chips, Trainium and Inferentia, which are in high demand due to a shortage in the industry.

The demand for GPUs is high, making Trainium and Inferentia attractive due to their price performance and availability. Large LLM providers and start-ups are using these chips for their training and inference. CodeWhisperer is a game changer for developers, allowing them to be more productive and customize their own code base. Customers are excited about this. There is still a lot of potential for AI services, such as automated ways to understand developer environments and make data analysis easier.

The speaker believes that the upcoming re:Invent event will reveal new initiatives from the robotics team at Amazon. These investments have already had a positive impact on productivity, cost, and safety. The speaker also discusses the potential for the AI theme to become more prominent in the IT budget cycle in 2024. In terms of the ads business, the speaker is excited about the potential for growth and mentions the mid-20s compound growth rate.

The speaker believes that there is still room for optimization in large platforms and applications, but there has been a shift towards new initiatives and customer transformations. They predict that this trend will continue for several years. On the advertising side, while there has been caution in top-of-funnel products, there is still strength in lower-funnel products.

The company has performed well in tough economies due to their owned and operated properties with high volumes and valuable properties like Thursday Night Football. They also have a strong focus on machine learning and algorithms to improve advertising performance. The company is also looking to expand into integrating advertising into video, audio, and grocery, and has started externalizing some products to third-party websites.

The speaker discusses the success of recent deals with companies like Pinterest, Hearst Newspapers, and BuzzFeed and their focus on providing a great customer experience. The question then shifts to AWS deals and the profitability of international markets. The speaker states that the quarter was just short of breakeven and explains that established countries like the U.K., Germany, Japan, and France are profitable and continue to work on improving their cost structure and expanding their operations. They also mention that they are working on productivity initiatives and speed globally and that customers are responding positively.

Over the past 6 years, 10 new countries have been launched and it takes time for them to become profitable. The trend lines are positive and investments will continue to be made in areas such as Prime and fulfillment. It is not clear if profitability has been reached permanently, but efforts are being made to accelerate the journey. There has been a broad mix of industries and geographies for AWS deals, with some being first-time large deals and others being expansions of existing agreements. The timing of these deals can be unpredictable, but there has been an increase in deal volume in recent years.

The speaker discusses how companies have been more conservative in the face of an uncertain economy, leading to slower progress on deals and a focus on saving costs. However, there has been a recent shift towards looking forward and deals that were previously discussed for months are now closing. The speaker thanks the participants and announces that a replay will be available on the Investor Relations website. The call ends.

This summary was generated with AI and may contain some inaccuracies.