The paragraph is an introduction to Amazon.com's 4th Quarter 2024 financial results teleconference. The operator welcomes participants and introduces Dave Fildes, Vice President of Investor Relations, who will lead the call. CEO Andy Jassy and CFO Brian Olsoski will also be available to answer questions. The call will focus on financial results compared to the same period in 2023 and includes forward-looking statements that may differ from actual results. The discussion may reference non-GAAP financial measures, with further information available in the press release and SEC filings.

The company's revenue for the reported period was $187.8 billion, marking a 10% increase from the previous year. This growth faced a stronger-than-expected foreign exchange headwind of $700 million, implying an 11% increase year over year without this issue, which would have exceeded their highest guidance. Operating income reached $21.2 billion, a 61% increase from the prior year, and free cash flow over the past twelve months, adjusted for equipment finance leases, was $36.2 billion, up $700 million. The company's North America segment showed a 10% revenue growth, while the international segment saw a 9% growth, excluding foreign exchange impacts. The focus remains on expanding selection, reducing prices, and enhancing convenience, which has driven strong unit growth surpassing revenue growth. The company is pleased with its 2024 performance and has plans for 2025. Andy Jassy attributed the results to improvements in the customer experience and innovative efforts.

In 2024, Amazon expanded its product offerings and third-party seller partnerships, notably adding brands like Clinique and Estee Lauder to its store. The company launched Amazon Haul in the U.S., offering low-priced products in one location, and customers saved over $15 billion during major sales events. Amazon maintained its position as having the lowest online prices, averaging 14% lower than other retailers, for the eighth consecutive year. Delivery services also improved, with a significant increase in same-day delivery sites, resulting in over 9 billion units delivered the same or next day worldwide. These initiatives contributed to accelerated growth in Prime membership.

For $14.99 a month, Amazon Prime offers a wide range of benefits, including unlimited free shipping, access to Prime Video, Amazon Music, and grocery delivery, as well as a new fuel discount. The company is enhancing its fulfillment network to improve efficiency, reduce costs, and speed up deliveries. By regionalizing and optimizing its US network, Amazon has increased the availability of ordered items and reduced packaging and transportation costs. These improvements have led to a decrease in global costs per unit while enhancing delivery speed, safety, and product selection. More benefits are expected for Prime members in 2025.

The paragraph discusses the company's strategic initiatives for 2025 and beyond, focusing on cost reduction through inventory optimization, expanding the same-day delivery network, and enhancing robotics and automation. In advertising, the company reports strong growth with $17.3 billion in quarterly revenue, an 18% year-over-year increase, leading to a $69 billion annual revenue run rate. Sponsored products are the largest source of ad revenue, with notable growth potential. The company is also developing new revenue streams in streaming, with Prime Video ads showing positive results. Their advertising approach encompasses the full marketing funnel, offering advanced features like Amazon Marketing Cloud for data analysis and a new multi-touch attribution model for campaign effectiveness. AWS also experienced a 19% growth, reaching a $115 billion annualized revenue run rate, highlighting its significance as a substantial business.

The paragraph discusses the optimistic outlook for AWS and its customers as enterprises adopt generative AI technologies over the coming years. AWS anticipates that generative AI will become a fundamental component of applications, alongside compute, storage, and databases, with most of this development occurring on the cloud, particularly AWS. The paragraph emphasizes the importance of having powerful capabilities across all layers of the technology stack, highlighting the role of compelling chips in AI compute. AWS has a longstanding partnership with NVIDIA but is also developing its own custom AI silicon, Tranium 2, to provide better price-performance. This new chip is demonstrating significant results, with companies like Adobe, Databricks, and Qualcomm testing it, and Anthropic choosing to build its future models on it.

The paragraph discusses how AWS is advancing its cloud computing capabilities with enhanced chip technology and services for AI model building. AWS has developed a significant training cluster with superior Exo-ZLofts for training models, outperforming competing cloud providers. They are also focusing on the development of future chipsets and AI capabilities such as Tranium. Amazon SageMaker AI offers services to streamline model training and management, including HyperPOD for efficient workload handling, cost management, and workload prioritization. Additionally, Amazon Bedrock is a fully managed service providing high-performance foundation models for building generative AI applications, with new model additions like Luma AI and DeepSeq's R1 models, enhancing AWS's offerings for AI developers.

The paragraph discusses the advancements in Amazon's Bedrock features, which include prompt caching, intelligent prompt routing, and model distillation, aimed at reducing cost and latency for customers. It introduces Amazon's Nova models, part of Bedrock, known for their intelligence, affordability, and integration with Bedrock features. Thousands of AWS customers, like Palantir and Robinhood, are benefiting from these models. Additionally, Amazon Q, a generative AI assistant, has facilitated significant cost and time savings in software development and migration tasks, exemplifying practical AI applications. The paragraph emphasizes Amazon's commitment to AI while not neglecting the core modernization of technology for businesses.

The paragraph highlights AWS's new agreements with several major companies and emphasizes the positive customer feedback received from their recent AWS reInvent event. AWS continues to lead in infrastructure innovation, launching products like Amazon Aurora D SQL, Amazon S3 tables, and an enhanced Amazon SageMaker to advance data analytics and AI capabilities. As 2024 ends, the company celebrates a successful year with future plans for 2025. The financial update from Brian Olsavsky reports a worldwide revenue of $187.8 billion, representing an 11% year-over-year increase, excluding foreign exchange impacts.

The paragraph discusses the company's financial performance in the quarter, highlighting a significant $900 million foreign exchange (FX) headwind that exceeded projections, impacting revenue guidance. Despite this, the company achieved a record operating income of $21.2 billion. The North America segment saw a 10% increase in revenue to $115.6 billion, while the international segment grew 9% year over year, excluding FX effects. Worldwide paid units rose 11% due to low prices, broad selection, and fast shipping. North America's operating income increased by $2.8 billion to $9.3 billion, with an 8% operating margin, while the international segment improved its operating income by $1.7 billion to $1.3 billion, achieving a 3% margin. The company marked eight consecutive quarters of margin improvement and reduced global cost per unit for the second consecutive year, supported by enhanced productivity in transportation and fulfillment operations. The success during peak seasons is attributed to the effective execution by the teams, who are appreciated for their contributions.

The paragraph outlines various strategies and developments aimed at cost reduction and growth for Amazon. The company is optimizing its inventory and delivery networks in the US and expanding automation and robotics globally. Advertising continues to enhance profitability, while investments are being made in areas like Alexa, health care, grocery, and satellites. Amazon aims to capitalize on its satellite network costs once they achieve commercial viability. Furthermore, Amazon Web Services (AWS) saw significant revenue and operating income growth, driven by increased adoption of both generative and non-generative AI solutions and cloud migrations.

The paragraph discusses AWS expecting fluctuations in operating margins due to investments and the increased estimated useful life of servers starting in 2024, contributing to a margin increase. Capital investments, combining cash CapEx and equipment finance leases, amounted to $26.3 billion in the fourth quarter and are expected to maintain a similar rate through 2025. These investments, focusing on AWS technology infrastructure, AI services, fulfillment, transportation, same-day delivery facilities, robotics, and automation, aim to support future growth. For Q1 revenue guidance, projected net sales range from $151 billion to $155.5 billion, impacted by foreign exchange rate changes, which are expected to pose a $2.1 billion headwind, and the effects of comping the previous year's leap year.

In Q1 2024, an extra day generated approximately $1.5 billion in net sales and boosted growth across all segments. Operating income for Q1 is projected between $14 billion and $18 billion, factoring in changes to the useful life of fixed assets, which are expected to decrease 2025 operating income by around $400 million. A recent study led to reducing the useful life of certain servers and network equipment from six to five years starting January 2025, potentially decreasing 2025 operating income by $700 million. Additionally, retiring some servers early resulted in a Q4 2024 expense of about $920 million, further impacting 2025 operating income. These changes mainly affect the AWS segment. Conversely, the useful life for heavy equipment in fulfillment centers will be extended from ten to thirteen years, potentially increasing 2025 operating income by $900 million. Overall, the company remains optimistic for 2025.

The paragraph discusses a company's focus on enhancing customer experiences to create long-term shareholder value. During a call, the operator introduces Mark Mahaney from Evercore ISI for questions. Mahaney asks about a $100 billion capital expenditure (CapEx) expected in 2025 and the impact of supply constraints on AWS growth. Brian Olsavsky responds, explaining that they spent $26.3 billion in CapEx in Q4 and that their annual CapEx rate in 2025 will largely be driven by AI investments for AWS. Olsavsky emphasizes that increased CapEx spending is a positive sign of anticipated demand and growth opportunities, particularly with AI.

The paragraph discusses significant investments in AI and infrastructure for future growth. It highlights the transformative potential of AI, comparing it to major shifts like the internet and cloud computing. The company is investing capital in AI technologies and expects long-term benefits for their business and stakeholders. They also plan to enhance their stores business by improving delivery speed and efficiency through more same-day facilities, rural delivery stations, and investments in robotics and automation. Additionally, the company acknowledges that while their AI-related revenues are growing rapidly, supply chain constraints are limiting even faster growth.

The paragraph discusses challenges in hardware production and supply chain constraints, particularly with third-party chips, power limitations, and shortages of components like motherboards. It highlights the recent launch of new hardware and chips, Tranium two, and mentions expected growth despite these constraints. The company anticipates these constraints will ease by the second half of 2025. Additionally, during a Q&A session, Eric Sheridan from Goldman Sachs asks about the impact of recent news from China on AI development and cost management. The discussion touches on investing in AI and utilizing open-source custom silicon to improve cost efficiency, speed up market deployment, and potentially achieve higher returns on capital.

In this paragraph, Andy Jassy discusses the advancements and techniques of a company called DeepSeq, particularly their innovations in reinforcement learning and inference optimizations. He mentions the competitive and collaborative nature of frontier model development, highlighting AWS's approach to offering various leading models for diverse customer needs through services like Amazon Bedrock and SageMaker. He also addresses the misconception that reducing technology costs, like those for inference, will decrease overall technology spending, noting that this is not typically observed in practice.

The paragraph discusses the historical trend of decreasing costs in cloud infrastructure with the example of AWS, explaining that reducing per-unit costs has often led companies to spend more overall on technology by enabling new possibilities. It anticipates a similar trend in AI, particularly with the cost of inference expected to drop significantly. This reduction is expected to make it easier for businesses to integrate inference and generative AI into applications, benefiting customers and the business offering these services. The paragraph concludes with a transition to a new question about AWS margins and the impact on shipping operations, specifically related to UPS.

In this response, Andy Jassy discusses two main points. First, he addresses AWS's fluctuating operating margins, noting that AI's early-stage development brings lower margins and heavy investments, but expects long-term margins to align with non-AI business. He's satisfied with AWS's growth and efficiency improvements. Second, he talks about the relationship with UPS, highlighting that Amazon has increased its reliance on its own logistics network partly due to the pandemic's demands and the need for cost efficiency. UPS, considering Amazon's business lower margin, reduced its partnership volume, while Amazon managed the logistics internally.

In this paragraph, Brian Nowak from Morgan Stanley inquires about the advancements in robotics and their scalability, as well as the potential impact of generative AI and GPU-enabled technologies on Amazon's retail experience by 2025. Andy Jassy responds by highlighting the successful integration of robotics in Amazon's fulfillment network, which has led to cost savings, productivity, and safety improvements. He specifically mentions the Shreveport facility as a testing ground for new robotics initiatives, which have shown promising results in speed, productivity, and cost efficiency. Plans are in place to expand these innovations to other facilities, both new and existing, across their network.

The paragraph discusses the ongoing and future potential use of robotics and AI to enhance productivity, safety, and cost efficiency in a fulfillment network and retail business. It mentions new initiatives and continuous improvements in robotics for fulfillment, expressing a belief that most processes can be enhanced by robotics. It also highlights the adoption of AI, particularly generative AI, to improve customer service and assist third-party sellers by rearchitecting chatbots and developing applications to streamline the product listing process. This use of AI is seen as a key driver for productivity and cost savings across Amazon's operations.

The paragraph discusses the integration of generative AI into the retail business to enhance productivity and create new experiences. It highlights how AI applications streamline processes like filling out information, managing inventory with improved forecasting and regional predictions, and optimizing robot operations. The text mentions AI-based tools such as Rufus, an AI shopping assistant, Amazon Lens for image-based product searches, and AI-driven insights into clothing sizes, illustrating the broad application of generative AI for efficiency and innovative customer experiences.

The paragraph discusses the use of generative AI in recommending shoe sizes and enhancing Thursday Night Football by predicting player actions and vulnerabilities on the field. The speaker mentions the widespread application of AI across various business sectors, with about a thousand AI projects in development. Andy Jassy addresses questions about delivery speed and its impact on conversion rates and customer purchasing behavior. He notes that faster delivery continues to be beneficial, although options for more sustainable, slower delivery are also available to customers.

The paragraph discusses the impact of faster delivery on customer behavior and business operations. The speaker explains that quicker delivery options, such as same-day delivery for everyday essentials and pharmacy items, have led to increased customer use and frequent purchases. They mention significant architectural changes in their inbound network aimed at improving efficiency. Despite realizing some initial benefits, further tuning and refinement are needed for continued efficiency gains. The speaker anticipates further opportunities to reduce service costs throughout the year. The paragraph ends with the operator introducing a final question from Michael Morton about AI use in Amazon's eCommerce experience.

The paragraph discusses Amazon's approach to the evolving eCommerce discovery process, specifically highlighting the role of agents and assistants like Rufus in enhancing the customer experience. Andy Jassy mentions that Amazon, similar to other retailers, is navigating how to interact with these agents. Rufus, in particular, is improving over time and aids customers by quickly finding product information, summarizing customer reviews, and offering personalized assistance with orders. This reflects Amazon's investment in optimizing its fulfillment network and website for better customer interaction.

The paragraph discusses the improvement in personalization services, anticipating increased customer reliance on assistance from Rufus throughout 2025. Brian Olsavsky expresses gratitude for participation in the call, noting that a replay will be available on the Investor Relations website for three months and looks forward to future discussions. The operator concludes the teleconference.

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