Amazon.com, Inc. Q2 FY2025 earnings call

• Stores: Made progress in selection with return of Nike products and addition of premium brands. Improved delivery speed with over 40% increase in direct lanes, 12% reduction in average package distance, and 15% lower handling touches per unit. Set global speed record for Prime members.
• Ads: Generated $15.7 billion in revenue, up 22% year-over-year. Strong growth across full funnel advertising offerings, including partnerships with Roku and Disney.
• AWS: Grew 17.5% year-over-year to $30.9 billion, with an annualized revenue run rate over $123 billion. Continues to help organizations transition to cloud, with progress in AI hardware like Trainium2 and EC2 instances with NVIDIA Grace Blackwell Superchips. Launched new features in Bedrock and AgentCore to aid in building and deploying agents.
• Other areas: Progress with Alexa+ powered by generative AI, successful launch of Project Kuiper with enterprise and government agreements, positive results in Prime Video live sports, and growth of Amazon Pharmacy.

North America segment revenue was $100.1 billion, up 11% year-over-year. International segment revenue was $36.8 billion, up 11% year-over-year excluding foreign exchange impact. AWS revenue was $30.9 billion, up 17.5% year-over-year, with an annualized revenue run rate over $123 billion. Advertising revenue grew 22% year-over-year to $15.7 billion. Worldwide paid units grew 12% year-over-year. North America operating income was $7.5 billion, up $2.5 billion year-on-year with an operating margin of 7.5%, up 190 basis points. International segment operating income was $1.5 billion, up $1.2 billion year-on-year with an operating margin of 4.1%, up 320 basis points.

Q3 net sales are expected to be between $174 billion and $179.5 billion, with an estimated favorable foreign exchange impact of approximately 130 basis points. Q3 operating income is expected to be between $15.5 billion and $20.5 billion. Guidance incorporates order trends and assumptions, but actual results may differ due to various factors.

• Fluctuations in foreign exchange rates.
• Changes in global economic and geopolitical conditions.
• Tariff and trade policies.
• Customer demand and spending, including recessionary fears.
• Inflation, interest rates, and regional labor market constraints.
• World events and new emerging technologies.

Q: Can you help us understand with some more granularity how tariffs are being absorbed across suppliers, Amazon and consumers and whether you anticipate any change going forward? And on AWS, do you think the output gap is due more to customer demand or infrastructure supply?

A: On tariffs, we don't know where they'll settle and who will absorb higher costs; so far, no diminished demand or broad ASP increases. On AWS, AWS has a larger base, but we have a significant advantage in security, functionality, and end-to-end AI offering, and we have more demand than capacity currently.

Q: Can you disclose the backlog number? And on Alexa+, talk about its potential?

A: Backlog at June 30 was $195 billion, up about 25% year-over-year. Alexa+ is much more intelligent and capable, can take actions via natural language, with millions of U.S. customers using it and positive feedback; international rollout later in the year.

Q: Address the narrative that AWS is falling behind in GenAI?

A: AI is early; AWS has strong price performance with Trainium2, growing services like SageMaker and Bedrock, and recent launches in strands and AgentCore to aid in building and deploying agents, with a unique end-to-end AI offering.

Q: Talk about revenue guidance for Q3 and Q4?

A: Q3 net sales guided between $174 billion and $179.5 billion, driven by key inputs like price, selection, and convenience. Cautiously optimistic about Q3, but no guidance for Q4 at this time