AMZN is getting hammered after hours but this looks like it's mostly the strength of the dollar that's hurting their business abroad rather than insane amounts of spending.
-$20 billion free cash flow can't be good. Not quite meta levels of bad but really not too far off. Retail can't figure out how to make money, even with billions in ad sales.
"AWS segment sales increased 27% year-over-year to $20.5 billion, or increased 28% excluding changes in foreign exchange rates."
Point 1: AWS is over $80B annualized now. Amazing. Growing at 27% is still remarkable at that scale.
Point 2: Looks like AWS is slowing a bit [probably tempoarily]. As someone who focuses on cloud cost optimization for the majority of my time, this lines up with some of the data we were seeing in Q3 in terms of customers scaling back and making more commitments via EDPs, Saving Plans and RIs -- we just published some of this data here: https://www.vantage.sh/cloud-cost-report/2022-q3
- Web services sales of $20B, just shy of estimates
- AWS sales still growing like a juggernaut. Man, google ad revenue, Microsoft business revenue, aaple iphone revenue and aws revenue. You can just always rely on those 4.
- Retail in North America and International both lost money
Interesting:
- amazon head count is 1.5M employees world wide, the new IBM!!
- shares are down but I think its more due to their Q4 guidance than anything in Q3,
- due to amazon guidance for Q4 watch walmart, ebay, wayfair, etc.
These should all fall, this is probably the trade to make over trading amazon's earnings
- according to reports a 20% drop, which it is at now, would be its largest since 2006. This is crypto currency or META level lunacy, 100's of Billions just got vaporized in 15 minutes.
- AMZN, no longer a Trillion $ company, luckily that won't result in an ETF outflows:)
Watch for:
- do rising energy costs affect their web services business?
- do rising labour costs affect their retail business?
- do they really want to hire 150,000 people for Christmas like they did last year?
- they've reached GOOG, AAPL, and MSFT size now, growth will be tough.
This normally means cost cutting. Watch what the CFO announces around controlling costs.
- now that free money from the FED is truly over, will AMZN focus on cost cutting and mergers to drive revenue over organic growth
- also pointing to cost cutting is the new CEO Jassay is like Tim Cook at apple, a manager not a growth oriented CEO.
- from the CFO "We're takign actions to tighten our belts", there it is. All companies are in full blown cost saving mode now.
- does AWS announce alot more GPU instances now that ETH has merged?
- what does hiring look like with all tech giants cost cutting and with expectations that their stock price will be flat over the next year?
- saw on twitter someone point out that DOGE is up %30 in the past few days while AMZN is down %20. Completely meaningless but kind of funny in a dark way.
> Retail in North America and International both lost money
Is this pretty much proof that anyone even trying to compete with Amazon is basically throwing away money? That general-purpose online retail will simply never be profitable?
I think the fact that Walmart/Target/Best Buy/Costco/etc have been earning 2% to 5% profit margins for many decades was proof that general purpose online retail will not be very profitable.
I wonder if “retail” includes Amazon Prime subscription revenue? I doubt there’s many people signing up for Prime just for video or the other random perks Prime gets you, it’s 98% for the free shipping.
Q4 is peak season, all the inventory and capacity needed for that is bought, delivered and paid for in Q3. Same for any other competitor, basically normal eCommerce / retail numbers.
Amazon has worked extremely hard to make the warehouse jobs as brain dead as possible so that people off the street can be plug and played at a moments notice. They're treating the warehouse employees like robots because the medium term goal is to replace them all with robots.
> the new CEO Jassay is like Tim Cook at apple, a manager not a growth oriented CEO
Under Tim Cook, annual revenue grew from $76B (2010) to $387B (2022). That's rather decent growth, especially considering that at Apple's size, growth would presumably become harder and harder to attain.
> - they've reached GOOG, AAPL, and MSFT size now,
Amazon is much bigger than GOOG, MSFT and APPL now. They have more employees and bigger revenue than the other FAANG companies. In the US only Walmart has more employees and bigger revenue.
People are coming to realize that billions in revenue means nothing without any kind of margin.
And Amazon will never have high margins on retail. Their stock has coasted for decades on the belief that they would one day be able to monetize their e-commerce revenue.
Well here we are with over 100B in revenue. Where is the profit? There’s a dotcom level come to Jesus moment with the entire tech sector right now. The stories driving many of these stocks were nothing more than fairytales in the end
Cloud will have better margins, but the e-commerce business has been grossly overvalued for a long time.
It doesn’t mean they can’t be successful, but they will have more realistic valuations going forward, with much less excess
> they would one day be able to monetize their e-commerce revenue.
They make more on Amazon Ads than Alphabet makes on Youtube. So yes it looks like it's monetized. Even retail has profit. It's just being spent on other growth areas (Alexa, Games, Prime Air, Healthcare etc)
> People are coming to realize that billions in revenue means nothing without any kind of margin.
This is not a new realization. A business without margin is called a charity. Everyone from the immigrant family that did not go to college and operates a laundromat to Harvard Business School graduates know this.
It's new in the sense that valuations are now compressing on this basis, whereas before, the majority didn't care and we had 50x, 100x sales valued companies
People are coming to realize that billions in revenue without any kind of margin may not materialize in these business eventually becoming sufficiently profitable,
And/or
They may not be able to find a bigger fool to buy from them at a high price.
Surely all these smart investors already knew
retail businesses only earn sub 5% profit margins. They were/are betting on Amazon’s infrastructure as a service, platform as a service, and web services to deliver fat profit margins.
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[ 4.6 ms ] story [ 105 ms ] threadMSFT -8%, goog -10%, meta -22% and now amzn -20%
Point 1: AWS is over $80B annualized now. Amazing. Growing at 27% is still remarkable at that scale.
Point 2: Looks like AWS is slowing a bit [probably tempoarily]. As someone who focuses on cloud cost optimization for the majority of my time, this lines up with some of the data we were seeing in Q3 in terms of customers scaling back and making more commitments via EDPs, Saving Plans and RIs -- we just published some of this data here: https://www.vantage.sh/cloud-cost-report/2022-q3
[Disclosure, I'm ex-AWS and founder of a cloud cost company named https://www.vantage.sh/]
- Q3 Sales $127b meets est.
- Q3 EPS $0.28, Est $0.22, nice
- Q3 Operating Margin, 2%, that's tight
- Web services sales of $20B, just shy of estimates
- AWS sales still growing like a juggernaut. Man, google ad revenue, Microsoft business revenue, aaple iphone revenue and aws revenue. You can just always rely on those 4.
- Retail in North America and International both lost money
Interesting:
- amazon head count is 1.5M employees world wide, the new IBM!!
- shares are down but I think its more due to their Q4 guidance than anything in Q3,
- due to amazon guidance for Q4 watch walmart, ebay, wayfair, etc. These should all fall, this is probably the trade to make over trading amazon's earnings
- according to reports a 20% drop, which it is at now, would be its largest since 2006. This is crypto currency or META level lunacy, 100's of Billions just got vaporized in 15 minutes.
- AMZN, no longer a Trillion $ company, luckily that won't result in an ETF outflows:)
Watch for:
- do rising energy costs affect their web services business?
- do rising labour costs affect their retail business?
- do they really want to hire 150,000 people for Christmas like they did last year?
- they've reached GOOG, AAPL, and MSFT size now, growth will be tough. This normally means cost cutting. Watch what the CFO announces around controlling costs.
- now that free money from the FED is truly over, will AMZN focus on cost cutting and mergers to drive revenue over organic growth
- also pointing to cost cutting is the new CEO Jassay is like Tim Cook at apple, a manager not a growth oriented CEO.
- from the CFO "We're takign actions to tighten our belts", there it is. All companies are in full blown cost saving mode now.
- does AWS announce alot more GPU instances now that ETH has merged?
- what does hiring look like with all tech giants cost cutting and with expectations that their stock price will be flat over the next year?
- saw on twitter someone point out that DOGE is up %30 in the past few days while AMZN is down %20. Completely meaningless but kind of funny in a dark way.
- this market is rough and unforgiving:(
Is this pretty much proof that anyone even trying to compete with Amazon is basically throwing away money? That general-purpose online retail will simply never be profitable?
In 2012, they had 88,000 … if scaling were linear—which it's not—that averages out to 141,000 people to hire a year.
In a single year, 2019 to 2020, they grew their workforce ~63%, from 798k to 1.3m.
Insane.
Under Tim Cook, annual revenue grew from $76B (2010) to $387B (2022). That's rather decent growth, especially considering that at Apple's size, growth would presumably become harder and harder to attain.
Amazon is much bigger than GOOG, MSFT and APPL now. They have more employees and bigger revenue than the other FAANG companies. In the US only Walmart has more employees and bigger revenue.
And Amazon will never have high margins on retail. Their stock has coasted for decades on the belief that they would one day be able to monetize their e-commerce revenue.
Well here we are with over 100B in revenue. Where is the profit? There’s a dotcom level come to Jesus moment with the entire tech sector right now. The stories driving many of these stocks were nothing more than fairytales in the end
Cloud will have better margins, but the e-commerce business has been grossly overvalued for a long time.
It doesn’t mean they can’t be successful, but they will have more realistic valuations going forward, with much less excess
They make more on Amazon Ads than Alphabet makes on Youtube. So yes it looks like it's monetized. Even retail has profit. It's just being spent on other growth areas (Alexa, Games, Prime Air, Healthcare etc)
I recommend investing on real data, not what you may imagine up the company is doing
This is not a new realization. A business without margin is called a charity. Everyone from the immigrant family that did not go to college and operates a laundromat to Harvard Business School graduates know this.
People are coming to realize that billions in revenue without any kind of margin may not materialize in these business eventually becoming sufficiently profitable,
And/or
They may not be able to find a bigger fool to buy from them at a high price.
Surely all these smart investors already knew retail businesses only earn sub 5% profit margins. They were/are betting on Amazon’s infrastructure as a service, platform as a service, and web services to deliver fat profit margins.