Amazon reported its net sales increased 15% year-on-year on a constant currency basis to 181.5 billion US dollars in the first quarter. “AWS is growing 28% (our fastest growth in 15 quarters) on a very large base, our chips business topped a 20 billion dollar revenue run rate (growing triple digits year-over-year), advertising grew to over 70 billion in TTM revenue, and unit growth in our stores reached 15% (the highest since the tail end of covid lockdowns)," said Andy Jassy, CEO of Amazon.
He also claimed that Amazon's Trainium chip, which is designed for AI, will save its tens of billions of dollars of capex each year "and provide several hundred basis points of operating margin advantage versus relying on others' chips for inference."
Jassy noted that the faster AWS grows, the more short-term capex Amazon will spend. "AWS has to lay out cash for land, power, buildings, chips, servers, and networking gear in advance of when we can monetise it, typically six to 24 months before we start billing customers, depending on the component," he explained. "However, these capex investments fund assets with many year useful lives, 30+ years for data centres, five to six years for chips, servers, and networking gear."
Jassy also cautioned that in times of "very high growth like now, where the capex growth meaningfully outpaces the revenue growth, the early years free cash flow is challenged until these initial tranches of capacity are being monetised and revenue growth outpaces capex growth."
Claiming that billions of people do not have access to broadband connectivity, Jassy said that Amazon Leo, its satellite arm, will "be one of two offerings that are on the current technology edge, and I think that we will have a meaningful advantage in performance. I think we'll be about 2x better on the downlink than existing alternatives and about 6x better on the uplink performance than existing alternatives. I think we'll have a cost advantage for customers."
He suggested Amazon Leo will become a "many billion-dollar revenue business", but will, like AWS, be capital intensive upfront. Source: Amazon earnings call transcript
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