May 1, 2026

EP338 - Amazon Q1 2026 Earnings

EP338 - Amazon Q1 2026 Earnings

EP338 - Amazon Q1 2026 Earnings Chapters Welcome to the Jason and Scott Show Spring Break Reflections Upcoming Events and Workshops Healthcare Insights Amazon's Prime Day Changes Amazon's Q1 Earnings Overview Amazon's Retail Performance...

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EP338 - Amazon Q1 2026 Earnings

Chapters

0:32 Welcome to the Jason and Scott Show
1:36 Spring Break Reflections
3:20 Upcoming Events and Workshops
5:47 Healthcare Insights
8:00 Amazon's Prime Day Changes
9:58 Amazon's Q1 Earnings Overview
20:04 Amazon's Retail Performance Analysis
28:28 Fulfillment and Delivery Innovations
30:26 Global Instant Commerce Trends
31:32 Revenue Breakdown Insights
35:01 Whole Foods Performance
42:47 Advertising Business Growth
46:34 The Future of Agentic Commerce
54:05 UCP Developments and Strategy
1:04:41 Closing Thoughts and Reviews

In this episode, hosts Jason "Retailgeek" Goldberg and Scot Wingo dive into Amazon's strong Q1 2026 earnings, highlighting a 17% year-over-year revenue increase and its rise as the second-largest grocer in the US. They discuss Amazon’s significant investments in AI and AWS, which achieved 28% revenue growth, and the expanding advertising division competing with giants like Google and Meta.

Tune in for insights into Amazon's strategies in the evolving landscape of retail and commerce.

Episode 336 of the Jason & Scot Show was recorded on Friday, February 6th, 2026

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of ReFiBuy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.

WEBVTT

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Welcome to the Jason and Scott Show. This is episode 338 being recorded on Friday, May 1st, 2026.

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I'm your host, Jason Retail Geek Goldberg. And as usual, I'm here with your co-host, Scott Wingo.

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Hey, Jason, and welcome back. Jason and Scott Show listeners.

00:00:43.755 --> 00:00:50.035
Jason, shop talk was weird. It was, what's the Disney movie where they trade bodies and stuff?

00:00:50.215 --> 00:00:53.315
I felt like that was it you know how you're always yeah freaky friday

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that's right wacky wednesday freaky friday it's all

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the same we're recording this on a friday so that's good because you

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always say there was a period of five years i didn't

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go to shows and you're like all everyone does is ask me where

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you are it's getting kind of old that was my

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role at shop talk so everyone's like where's jason oh my god where is he you

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guys are never together and i had to break the news that you were on spring

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break so hopefully hopefully you had fun hopefully your sunscreen that you introduced

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us to you at NRF held up and all the, all the fun was had on your spring break.

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We, we missed you at shop talk, but it was really, it was more show for me because

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it was all about agentic commerce.

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Yeah. Yeah. Uh, the, I, I was grateful for you and everyone else keeping me abreast.

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Cause I did, I did have some FOMO and I'm glad you didn't find out that all

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those people that were asking you where I was were paid actors I hired to, to hound you.

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Yeah. Yeah. Or maybe you just double paid them to like make you know kind of

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like prove a point we'll never know.

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Yeah yeah mysteries of the of the earth and i like how you went freaky friday

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i was thinking more like stranger things upside down world but okay okay.

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Yeah a little scarier don't we want to keep this super g-rated so no pg themes here on our pockets.

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Yeah although there's an animated version of stranger things that i am now watching with my son so.

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Give me a spoiler-free thumbs up, thumbs sideways, thumb down.

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Thumbs up? It's, I didn't, I was, the concept is between season two and season

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three of the TV show, there was a gap.

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There was a gap year, which I'd forgotten about. And so this is an animated

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series that fills in the gap year.

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And so it jumps right in. Like, it was a little abrupt for my son because he

00:02:36.886 --> 00:02:39.686
didn't, you know, know who Eleven was, for example.

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But um yeah but he caught up and he's toy into it and it's because it's animated

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it's slightly less scary i would argue the first couple seasons of stranger

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things were probably okay but it started to get like a little more intense yeah.

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The first season oh okay i don't want to have spoilers but.

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There's yeah the.

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First season freaked my daughter out.

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Okay probably.

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She was probably older at that point than your son is now so,

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the the running down and getting in the elevator scene do you remember that

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i do yeah now yeah fair yeah yeah jump jump scares.

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Still get to him sometimes so.

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Yes so that one uh you may want to fast forward yeah well.

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We're gonna stick with the animated series for now okay.

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So that was good and i don't know where you're going next but i'm on my way

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next week to the vendor sauceify this is over on the branded manufacturer side. They're a PIM.

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They hate to be called a PIM, but everyone calls them a PIM.

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They do a show called Digital Shelf Summit. So I'm speaking there and I'll see

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a lot of our favorite folks.

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Kerry is going to be there. Scott Omsman from the Amazon world.

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And yeah, I'm really looking forward to that. That'll be a lot of fun.

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And I'm going to do a, I'm going to attempt a workshop where in real time,

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I analyze people's agendic commerce strategy.

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So let's see. It'll either be wildly entertaining or a train wreck,

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in which case it'll also be entertaining for everyone but me.

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So, yeah, we'll see how that goes.

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So I have been to that show before, so that is great. And I'm picturing,

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I have this really fond flashback.

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Back in the old days of e-commerce, I used to do these live SEO audits and live usability audits.

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And so people in the audience would really raise their hand and yell out their

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URL. And we like on stage in front of everyone would like dive into their checkout

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flow and talk about all the friction.

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So I'm much more modern than that. The spiritual successor.

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Is this all going to be like you winging it or are you using any automated tools?

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Does RefiBuy have some cool tools you're going to apply to this?

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I can use our, so we have, we can scan your product page and like figure out

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what you need to do at that layer. we have a bot detection system.

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Yep.

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Other than that, some of the things we, we can do all these things in an automated

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way, but they're not real time.

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They kind of lazily go about doing things. So it won't work for a show.

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So I will be doing some of it real time.

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Got it. So humble brag, I vibe coded a Microsoft Edge plugin that loads the

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page with the parameters that the LLM bots load it with.

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And it's not like super deep dive, but it does a quick thing to like,

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how big a file is it getting and what content is blocked and stuff like that.

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It's super interesting to even see what sites let the bots in and what don't.

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Yeah, very cool. You can kind of change the, what is that thing called?

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The agent.

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User parameter. Yeah. And yeah.

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Yeah.

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Good stuff.

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All right. Awesome. Well, I will not be going there, but I will be eager to hear how it is.

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I did a public event for Pubisys last week. We have a big healthcare division, and so I did...

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Pubisys Healthfront, which is for all the medical and pharmaceutical clients.

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And a very agentic forward conference, by the way, because that's an industry

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where you used to trust the white coats and now you trust the robot to give you medical advice.

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And I did the retail panel. So I had John Halverson, who's the CMO of Kenview,

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which makes Tylenol and Zyrtec and others, and the head of merchandising at CVS who, fun fact, they,

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for the first year of this year, the merchandise in every single CVS is a custom

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planogram store by store that was done agentically.

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So they've gone from kind of a regional model where they pick products and all

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the same products go to every store in a region to a model where the robot picks

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the product assortment for every, every store, which is cool.

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So yeah so i did that last week and then i got a bunch of private

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events coming up this week with some super awesome

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clients so i'll be looking forward to doing those events i can't disclose who

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they are and then i'll be in florida in a couple weeks for the latin summit

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which is a cool show about how to win latin customers here in the u.s but also

00:07:04.882 --> 00:07:09.002
how to how to win in the in latin american markets cool.

00:07:09.002 --> 00:07:10.862
We got to learn all spanish for that one are you gonna.

00:07:10.862 --> 00:07:17.322
No though i'll just use a google translate to live live simulcast me oh.

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Neat that'll be interesting.

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Yeah let's.

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Hope it doesn't throw anything weird in there.

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Yeah that's of course not true uh but it

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does it does remind me of it like i do some things

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in brazil occasionally and i showed up at a big event in brazil and the translators

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were waiting for me as i walked into the rehearsal and they met me at the door

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and they're like you're jason goldberg huh and i'm like yeah and they're like

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we've been watching your videos on YouTube, you're going to be a problem.

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Apparently Portuguese is a slow language that it takes a little longer to say

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things than it does in English. And I say a lot of things fast.

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So, yeah. And then are you already? Oh, go ahead.

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I was going to, I don't know if you're through with your update,

00:08:03.650 --> 00:08:07.470
but I was curious what you think about Amazon moving Prime Day this year.

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Is that going to mess up all your data?

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Yeah, so it is a data problem. So for folks that aren't in the know,

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I want to say 2021 Prime Day might have been in June.

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But since then, 2022 through 2025, Prime Day was in July, mid-July usually.

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And then they just announced, they haven't given us an exact date,

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but they've said it's going to be in June this year.

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And so one problem with that for Amazon, that means it falls in Q2 instead of Q3.

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So in all these earnings calls, when we're looking at year-over-year comps for

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quarters, that's a major impact that they'll call out.

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But also, you know, for all the vendors, Amazon doesn't give you a lot of warning

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to prepare for Prime Day and to get your inventory ready, get your offers ready.

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And so people kind of proactively plan on their own, assuming it's going to

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be in July again this year.

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And so this did cause a little bit of a panic for a lot of big three-piece sellers

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that are now kind of rushing to pull their plans forward to be ready a little

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earlier than they were expecting.

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Very cool. Where do you, more importantly, what's on your buy list?

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Yeah, I haven't even thought of what I need.

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You know, frequently I replenish a lot of like cables and charging accessories

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and my wife has banned me from making any more cables into the house.

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So may not be, may not be a big year for that.

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You should get an Apple device to run all your agents.

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So I would, but the Apple device I would like to get for my agents,

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I feel like I need a rack of mac minis and mac minis are very constrained right now they.

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Are they're i'm sure in chicago there's not a single one around.

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They're sold.

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Out here as well.

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Yeah and so i don't know that that's going to be a a big i mean we'll see if

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they get their supply chain straight and out by by uh june but but may not be available yet i.

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Don't think they will.

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And they are saying memory is going to be a bigger problem yeah.

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Yeah we'll talk about memory in a little bit,

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So today we're here to talk about Amazon's Q1 earnings. I thought I would go

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through a little bit of a setup.

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First of all, it was like the most exciting day for nerds like us ever.

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The first time ever, four of the MAG7, the Magnificent Seven companies,

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and the four we care about the most, announced on the same day.

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So it was at not only the same day, but the same aftermarket hour.

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Someone told me all three press releases hit within 70 seconds of each other.

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CNBC was like all blowing their mind. They had to like bring in all the extra

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hands. It was all hands on deck.

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The same here at the Jason Scott show headquarters. We had our whole team alerted

00:10:48.811 --> 00:10:50.371
to this and watching it very closely.

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Yeah the only thing i i want to slightly point out it you're the one geek that

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was super excited about this everyone else that covers all these earnings calls

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it was super grumpy about this.

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It was a fun challenge to see like could you process this information as fast as it was coming out.

00:11:07.191 --> 00:11:10.951
Yeah but my heart does go out to all our friends in the equity analyst space

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because that was they did a lot of yeoman work that yeah.

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Yeah we've had a lot of them you you know gene Munster, Mark Mahaney,

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Colin, Sebastian, they all, all of them cover these names and it was,

00:11:21.991 --> 00:11:24.931
it was, it was kind of frenetic for them to get everything out.

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Here's the setup. So we'll go through this pretty quick. So Microsoft was kind

00:11:31.511 --> 00:11:35.051
of the first, so they all released at like four o'clock, they dropped their

00:11:35.051 --> 00:11:39.391
press releases or like 4.02 and then they have, they always give it 30 minutes

00:11:39.391 --> 00:11:40.691
and then they start the conference calls.

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So Microsoft was first technically, because I think they started at 4.30 and

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then there were some at 5 and some at 5.30.

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Azure did really well. They didn't talk any about agentic commerce,

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so that was kind of boring.

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So I would kind of rate, from my perspective, Microsoft was the worst.

00:11:59.195 --> 00:12:03.455
But what's really freaking a lot of people out, and you'll remember this from

00:12:03.455 --> 00:12:07.475
our Q4 recap, is all this spend on AI.

00:12:09.095 --> 00:12:12.815
And Microsoft's Azure did really well. It didn't really beat.

00:12:12.935 --> 00:12:19.535
It was like what you would call a beat in brackets. They slightly beat for their calendar quarter.

00:12:19.895 --> 00:12:23.275
And then Microsoft, to make it confusing, is actually Microsoft's Q2 announcement.

00:12:23.395 --> 00:12:26.755
But everyone else was Q1 because they have a different fiscal announcement.

00:12:27.811 --> 00:12:30.951
They're they're on a calendar quarter basis

00:12:30.951 --> 00:12:34.171
but their fiscal is off by a quarter and i

00:12:34.171 --> 00:12:37.371
know walmart and a lot of the retailers are like not even on a calendar and

00:12:37.371 --> 00:12:41.451
like the whole thing it's like they don't even fall on normal quarterly boundaries

00:12:41.451 --> 00:12:46.131
so we won't we won't distract from all that so it was pretty good but what freaked

00:12:46.131 --> 00:12:50.291
everyone out was their capex guide they had guided uh previously that they were

00:12:50.291 --> 00:12:53.851
going to spend 160 billion this year and they're like kind of casually yeah

00:12:53.851 --> 00:12:56.331
we're going to need to raise that to $190 billion.

00:12:56.591 --> 00:12:59.231
And everyone's like, whoa, that's $30 billion more.

00:12:59.591 --> 00:13:03.631
They talked about half of it being due to component costs, to your point about memory.

00:13:03.831 --> 00:13:09.331
All this investment in AI has outrun the ability of factories to make enough memory chips.

00:13:09.431 --> 00:13:13.951
It has to be this very specific high-speed memory, which is also what goes sadly

00:13:13.951 --> 00:13:16.871
into the MacBook Minios, studios, and other items.

00:13:17.031 --> 00:13:20.911
So that's causing a huge supply problem there.

00:13:21.651 --> 00:13:25.991
Memory, again, We should brand that. And then the other half,

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though, is coming from this just immense wall of demand they're seeing for what they're doing.

00:13:31.131 --> 00:13:36.391
They announced everyone's using these new vanity measures around token generation and consumption.

00:13:36.671 --> 00:13:41.671
So theirs was their customers are now consuming over a trillion tokens a year.

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And that takes out all their internal like copilot and all their internal token generation.

00:13:47.571 --> 00:13:51.071
So that's just third party customers just chewing up tokens like crazy.

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And then we pivoted to Meta, also known as Facebook. They're interesting because

00:13:57.458 --> 00:13:58.778
all these other companies,

00:13:59.158 --> 00:14:03.018
these hyperscalers, they're called, their investment can, there's a direct tie

00:14:03.018 --> 00:14:09.138
to, so they invest X and you can see Y come out in revenue in the cloud computing part of the company.

00:14:09.298 --> 00:14:11.858
And then there's some ancillary gain in the other part of the company.

00:14:12.538 --> 00:14:15.618
Meta is a little bit more, it gets washed through.

00:14:15.838 --> 00:14:19.158
So they spend all this money and then it comes out in advertising gains.

00:14:19.158 --> 00:14:22.158
And it's hard to kind of like tell what was AI and what isn't,

00:14:22.238 --> 00:14:25.238
but their advertising businesses accelerated pretty materially.

00:14:25.398 --> 00:14:31.858
It grew over 24% year over year, and they launched their new models and they,

00:14:32.098 --> 00:14:33.618
those were pretty well received.

00:14:33.778 --> 00:14:38.578
They're like number five and six on the leaderboards now. So they're competitive, but not amazing.

00:14:39.038 --> 00:14:42.278
They did spend a lot of time talking about Agentec Commerce.

00:14:42.798 --> 00:14:46.458
We don't have time for this, but over on Retail Gentic, I actually clipped the

00:14:46.458 --> 00:14:50.538
five-minute answer that Zuckerberg gave about their vision for where they see

00:14:50.538 --> 00:14:52.838
this going. And it's really interesting to listen to.

00:14:53.198 --> 00:14:55.738
He kind of leaned in and said that

00:14:55.738 --> 00:14:58.438
they basically have a right to own this because they have so much data.

00:14:58.698 --> 00:15:02.418
They know all about products and what buyers want and that they think they can

00:15:02.418 --> 00:15:05.598
do something, quote unquote, really special in shopping.

00:15:05.598 --> 00:15:10.018
So it'd be interesting to see because, and that Wall Street analyst made me

00:15:10.018 --> 00:15:14.818
think of you, they kind of said, hey, you kind of tried this before and abandoned it.

00:15:14.918 --> 00:15:18.358
And his answer to that was, you know, kind of like the time is now.

00:15:18.498 --> 00:15:22.758
We think we can actually solve this in a way that's unique that we never could before.

00:15:22.938 --> 00:15:25.658
So I thought that was an interesting little piece there.

00:15:26.138 --> 00:15:29.118
Did you get anything from Microsoft and Meta you want to throw in the mix?

00:15:29.498 --> 00:15:33.298
Yeah. So, I mean, mainly on the Meta side, A, I'm excited that they're excited.

00:15:33.298 --> 00:15:37.658
You know, I have a healthy dose of cynicism from past efforts,

00:15:37.738 --> 00:15:42.178
but I do agree they have a ton of valuable context.

00:15:42.538 --> 00:15:47.558
And the marquee thing on that ad growth, that acceleration of digital ad growth,

00:15:47.578 --> 00:15:54.198
is they actually surpassed Google for digital ads in Q1, which is the first

00:15:54.198 --> 00:15:55.258
time that's ever happened.

00:15:56.458 --> 00:16:00.278
You know, you should think about the whole ecosystem. A lot of that is on Instagram

00:16:00.278 --> 00:16:05.178
and WhatsApp. It's not like ad growth is exploding on Facebook necessarily,

00:16:05.178 --> 00:16:07.538
but it's pretty interesting.

00:16:07.958 --> 00:16:12.098
And, you know, there's a lot of commerce intent that still happens across those

00:16:12.098 --> 00:16:16.978
platforms. So I do think they have a right to win if they're able to get the

00:16:16.978 --> 00:16:19.938
execution right. So I hope they try some cool stuff.

00:16:20.778 --> 00:16:27.078
Yep. And then they previously had guided to 125 to what they kind of give a range of CapEx.

00:16:27.218 --> 00:16:29.178
So they did 125 to 145 billion.

00:16:30.298 --> 00:16:36.218
That was what they actually stated going forward. And then previously they had done 115 to 135.

00:16:36.498 --> 00:16:39.418
So they nudged it 10 billion. So not nearly as much as Microsoft did.

00:16:40.118 --> 00:16:45.298
But Wall Street's having a hard time. So they were really kind of concerned with Microsoft.

00:16:45.958 --> 00:16:49.118
Also, Microsoft lost exclusivity on the open AI.

00:16:49.538 --> 00:16:54.298
And, or they traded it away. We'll talk about where it went here in a minute.

00:16:54.818 --> 00:16:57.098
But, you know, you see, they were the only place you could go.

00:16:57.258 --> 00:17:01.518
Azure was the only place you could go to get, you know, basically run OpenAI's

00:17:01.518 --> 00:17:02.438
model, which is one of the most

00:17:02.438 --> 00:17:05.518
popular ones with startups. That's what we use at RefiBuy and whatnot.

00:17:06.018 --> 00:17:08.678
So there was a little bit of negativity around that. That was kind of a surprise.

00:17:08.998 --> 00:17:13.458
And then a lot of people are kind of scratching their head on like that big $30 billion bump,

00:17:14.462 --> 00:17:18.902
And then with Meta, they're having a hard time kind of like believing the story

00:17:18.902 --> 00:17:20.302
that it's driving all this ad.

00:17:20.442 --> 00:17:22.842
And there's a little bit of a wait and see on these new models that they're

00:17:22.842 --> 00:17:25.062
coming out with. And also Agentec Commerce.

00:17:25.602 --> 00:17:29.822
And then Google came out and they just absolutely crush it on every dimension

00:17:29.822 --> 00:17:33.222
you can imagine. We could do like a two-hour podcast just on this.

00:17:33.442 --> 00:17:38.402
But their YouTube grew faster than it ever has.

00:17:38.702 --> 00:17:44.462
Their ad stuff has gotten so much better. And then I was pleasantly surprised,

00:17:44.602 --> 00:17:48.802
but Sundar has definitely gotten religion around Agentec Commerce after NRF.

00:17:49.322 --> 00:17:55.422
They actually tracked these mentions and they were close. I thought for sure

00:17:55.422 --> 00:18:00.722
they were going to win because they mentioned, you know, five or six times talking

00:18:00.722 --> 00:18:04.122
about UCP and Agentec Commerce and the prepared remarks.

00:18:04.242 --> 00:18:07.222
Make sure the press release prepared remarks and then Q&A.

00:18:07.522 --> 00:18:10.622
And then they got beat handily by someone we'll talk about in a second.

00:18:10.822 --> 00:18:13.662
So that was exciting for me from that lens.

00:18:13.862 --> 00:18:18.982
Their vanity metric is token volume also, but they talk about,

00:18:19.202 --> 00:18:22.002
they always change it too, which is frustrating.

00:18:22.302 --> 00:18:27.522
This time they talked about they generating 10 billion a minute through the API.

00:18:27.902 --> 00:18:35.222
And then they, Gemini has grown 3x from just last quarter and daily tokens generated.

00:18:35.222 --> 00:18:38.462
They spent a lot of time talking about UCP. We'll talk about that in a second.

00:18:38.702 --> 00:18:42.702
And then they guided their CapEx up. Let me get the actual number here.

00:18:43.222 --> 00:18:47.082
It's hard to pull this stuff from all over the place. So they had prior,

00:18:47.362 --> 00:18:50.802
they, you know, if you boil it down, they basically did a $5 billion bump.

00:18:50.962 --> 00:18:54.602
So of the increases, they were the least, well, Amazon, spoiler,

00:18:54.762 --> 00:18:57.042
was unchanged because they had put such a big number out, but.

00:18:57.824 --> 00:19:01.864
So, so that was really well received plus, so they did what's called a beat

00:19:01.864 --> 00:19:06.904
and a raise, whereas I would say meta and Microsoft were beat bracket,

00:19:07.164 --> 00:19:10.584
meaning they beat for the current corner. And then in the future quarter,

00:19:10.704 --> 00:19:12.264
they kind of bracketed where Wall Street was.

00:19:12.404 --> 00:19:14.944
It kind of came in line with, with where Wall Street is.

00:19:15.804 --> 00:19:19.424
And that, see, that was, that was the setup.

00:19:19.604 --> 00:19:24.584
So that's the setup. The thing to watch for with Google is we do have Google I.O.

00:19:24.884 --> 00:19:29.064
Coming up in mid-May, and I'll be at that. So that's exciting.

00:19:29.184 --> 00:19:30.384
I forgot to mention that at the top.

00:19:30.524 --> 00:19:33.784
So I got an invite to go to Google I.O., never been there. It's always been

00:19:33.784 --> 00:19:35.604
on kind of one of my conference bucket list.

00:19:35.884 --> 00:19:39.424
So I'm going to go hang out with all the Google nerds and see what they're going

00:19:39.424 --> 00:19:42.324
to be doing around Agente Commerce. So I'll report back on that.

00:19:43.024 --> 00:19:45.744
Very cool. I'm going to expect a special report just on the cafeteria.

00:19:46.264 --> 00:19:49.944
Oh, yeah, we actually are in some Google building. So I've been to,

00:19:49.944 --> 00:19:53.864
I've been to the Google cafeteria and I can tell you it's going to be lavish and crazy.

00:19:54.204 --> 00:19:56.324
A lot of food. I don't understand. I'm a simple guy.

00:19:58.704 --> 00:19:59.764
That's awesome. Yeah.

00:20:01.256 --> 00:20:03.436
And Scott, you teased something about UCP.

00:20:04.936 --> 00:20:09.556
Yeah. So that brings us to the main event, and it wouldn't be the Jason Scott

00:20:09.556 --> 00:20:12.036
show without a little bit of Amazon news.

00:20:13.136 --> 00:20:17.256
Yeah. So obviously, people probably tuned in here because they're used to us

00:20:17.256 --> 00:20:19.296
talking about Amazon quarterly earnings.

00:20:19.496 --> 00:20:22.656
We made you pay a horrible price with all that precursor stuff.

00:20:22.856 --> 00:20:26.176
So spoiler alert for any of you that just care about the Amazon equity,

00:20:26.176 --> 00:20:32.196
it was a wild ride. It opened down like 4% after hours.

00:20:32.376 --> 00:20:35.876
And then once trading started up next day, I think it bounced back up 4%.

00:20:35.876 --> 00:20:44.496
And so that plus to minus 4% swing on an almost $3 trillion market cap company, that's ginormous.

00:20:44.616 --> 00:20:49.656
That's like $200 billion in value coming and going in a single day.

00:20:49.656 --> 00:20:53.076
So if you're someone that pays attention to this stuff day to day,

00:20:53.196 --> 00:20:58.936
which I would not recommend, that was probably anxiety-ridden.

00:20:59.456 --> 00:21:05.816
You know, the top line is that AWS is killing it.

00:21:05.996 --> 00:21:11.436
They basically, like, from an operational standpoint, like, it was a beat in bracket.

00:21:11.656 --> 00:21:15.136
Like, they beat every number. They were a little more conservative on their projections.

00:21:15.136 --> 00:21:22.236
But I think what drove that swing was that they they did well in all their numbers,

00:21:22.296 --> 00:21:27.236
but they also said that, hey, the enormous CapEx spending is going to continue

00:21:27.236 --> 00:21:28.436
for the foreseeable future.

00:21:28.696 --> 00:21:33.116
And so I think it's I think investors are having a lot of anxiety over the eye

00:21:33.116 --> 00:21:38.076
watering investments that that all these companies are proposing making in order

00:21:38.076 --> 00:21:40.716
to to win this this future agentic market.

00:21:42.292 --> 00:21:44.832
Yeah. Yeah. It was really interesting to watch the after hours.

00:21:45.072 --> 00:21:49.212
It was so much that people didn't know how to adjust it. Like, like they have.

00:21:49.672 --> 00:21:52.412
So Amazon was already complicated, right? You got a retailer,

00:21:52.672 --> 00:21:56.972
cloud computing, and then listeners know there's actually a marketplace in there.

00:21:57.452 --> 00:22:01.192
And there's an ad piece. And we talk about that. And they have the devices and

00:22:01.192 --> 00:22:03.532
other stuff, but that's kind of fallen to the side there.

00:22:03.692 --> 00:22:06.372
And now it's kind of like, so that's like four big things.

00:22:06.572 --> 00:22:09.952
There's a fifth thing now, which is like all this AI stuff. they

00:22:09.952 --> 00:22:13.032
they are now a hardware chip they're now basically

00:22:13.032 --> 00:22:15.832
competing with nvidia so that's like a sixth thing

00:22:15.832 --> 00:22:18.592
and then there's a seventh thing which is they're now a

00:22:18.592 --> 00:22:23.252
satellite company and it's just like everyone's like it kind of reminds me of

00:22:23.252 --> 00:22:28.412
ge where there's like so many pieces it's hard to consume what any of it means

00:22:28.412 --> 00:22:31.672
when they drop their press release now they've gotten like longer and way more

00:22:31.672 --> 00:22:36.712
complicated and yeah so so it just takes a while for everyone to kind of like to just like,

00:22:36.792 --> 00:22:40.132
well, is this good or bad news? Like, what is going on inside of this thing?

00:22:40.912 --> 00:22:44.692
But because you are Jason Scott Show listeners, we're going to peel the onion

00:22:44.692 --> 00:22:50.432
and kind of for the retail lens, we're going to share what we saw that we think was most interesting.

00:22:50.912 --> 00:22:55.072
Let's start with the headline numbers. So Jason mentioned it was a beat and a bracket.

00:22:55.572 --> 00:23:00.652
Revenue was up 17% year on year, which was great, which really kind of crushed consensus.

00:23:01.012 --> 00:23:05.812
Consensus was at about $178 billion and they came in at $181.5.

00:23:06.292 --> 00:23:11.412
That's a nice, clean 3.5 billion beat, which is, yeah, not too shabby.

00:23:11.712 --> 00:23:16.912
I don't know, Jason, do you usually exceed your family budget by 3.5 billion on the revenue side?

00:23:17.392 --> 00:23:18.372
Only on the spending side.

00:23:19.112 --> 00:23:22.992
Dang it, me too. It's because of Prime Day. We can blame it on Prime Day.

00:23:23.452 --> 00:23:25.212
Every day is Prime Day at my house, Scott.

00:23:29.612 --> 00:23:33.312
Amazon, maybe you contributed. Oh, and they actually said thank you to this

00:23:33.312 --> 00:23:36.792
guy in Chicago that contributed to that $3.5 billion.

00:23:37.272 --> 00:23:39.132
Yeah. Doug, you're welcome.

00:23:39.792 --> 00:23:42.032
Yeah. And then Starbucks probably had a call out for you, dude.

00:23:43.032 --> 00:23:46.712
The operating income, a surprise to the upside.

00:23:46.992 --> 00:23:50.832
So it was an all-time record, which is kind of not that big a deal because they've

00:23:50.832 --> 00:23:52.232
just been chugging on that.

00:23:52.672 --> 00:23:56.352
Consensus was $19 billion and they came in at $24 billion, which is pretty amazing

00:23:56.352 --> 00:23:59.472
on the income side. And all that flowed through to EPS as well.

00:24:00.132 --> 00:24:05.372
So everyone was expecting with all this CapEx and investment that the profit

00:24:05.372 --> 00:24:06.552
numbers would be under pressure.

00:24:06.792 --> 00:24:10.992
So everyone was kind of perplexed by how this could happen, but we're going

00:24:10.992 --> 00:24:14.852
to actually peel that apart and reveal what's going on inside of there,

00:24:15.092 --> 00:24:18.412
starting with the retail org. Jason, you want to take that?

00:24:19.032 --> 00:24:22.412
Yeah. So for those of you that are newer listeners, Amazon actually started

00:24:22.412 --> 00:24:25.432
out as a retailer. I know that'll be surprising. Yeah.

00:24:25.432 --> 00:24:26.852
They sold books. Do you remember that?

00:24:26.972 --> 00:24:31.432
Yeah. Those are blogs that used to be printed on papyrus. And I believe their

00:24:31.432 --> 00:24:33.372
first mission was to be the world's largest bookseller.

00:24:33.992 --> 00:24:35.372
That's when we started the podcast.

00:24:35.612 --> 00:24:35.932
Yeah.

00:24:36.932 --> 00:24:37.692
On papyrus.

00:24:37.812 --> 00:24:44.352
It took a time to get to listeners. Yeah. Yeah. So today when they talk about retail,

00:24:44.492 --> 00:24:49.092
it's really complicated because they talk about their income numbers and their

00:24:49.092 --> 00:24:54.252
sales numbers, which are not perfectly analogous to how much goods they sold.

00:24:54.412 --> 00:25:00.432
So we often talk about this hybrid number that we call gross merchandise value,

00:25:00.572 --> 00:25:04.772
which is, hey, forget the fact that some stuff Amazon sells they own and they

00:25:04.772 --> 00:25:06.492
take credit for 100% of the sale.

00:25:06.652 --> 00:25:10.752
And a lot of the stuff they sell is a marketplace and they take a commission on that.

00:25:10.852 --> 00:25:15.752
So when they talk about their revenue, they're adding the full cost of the goods

00:25:15.752 --> 00:25:20.912
they own and they're adding the fees they charge on the goods that other people own.

00:25:21.092 --> 00:25:25.572
And so those numbers are interesting to look at on a comparative basis.

00:25:25.692 --> 00:25:27.772
Did they go up or down from last quarter and last year?

00:25:27.972 --> 00:25:32.112
They're not helpful to say, how did they do versus Walmart or Best Buy or some

00:25:32.112 --> 00:25:36.252
other retailer? And so on all those numbers, of course, they performed very well.

00:25:36.512 --> 00:25:41.072
Like their North American revenue was $104 billion, which is...

00:25:41.832 --> 00:25:46.912
12%. Last quarter, they were up like 8%. So it's an accelerated growth.

00:25:47.792 --> 00:25:51.292
International grew even faster, which international is a younger,

00:25:51.492 --> 00:25:53.532
less mature business. So they're about 40 billion.

00:25:54.112 --> 00:26:00.472
And in international, it grew like 19%. And so they generated better margins

00:26:00.472 --> 00:26:02.832
than they traditionally do.

00:26:03.032 --> 00:26:05.712
Their income ended up at like 8.3 billion.

00:26:06.052 --> 00:26:10.572
But we like to estimate that GMV number, right?

00:26:10.712 --> 00:26:14.752
And so, Scott, I used to go based on an estimate you published,

00:26:14.752 --> 00:26:18.492
and then we started calculating it. Now the analysts do a really good job.

00:26:18.652 --> 00:26:22.212
So both Morgan Stanley and Citibank had these really sophisticated models that

00:26:22.212 --> 00:26:27.552
I borrowed from, and their models basically agree on USGMV.

00:26:27.912 --> 00:26:32.952
So USGMV for Q1 was probably up about 10.6%.

00:26:32.952 --> 00:26:37.732
So to put that in perspective, the US Department of Commerce says that core

00:26:37.732 --> 00:26:42.012
retail, which is kind of a similar set of services to Amazon retail,

00:26:42.492 --> 00:26:46.212
core retail for ChewOne was up 4.75%.

00:26:46.212 --> 00:26:51.032
Amazon is the first or second largest retailer in the US, depending on how you want to count.

00:26:51.332 --> 00:26:59.532
And their core retail business was up 10.6%. So more than they're amongst the

00:26:59.532 --> 00:27:02.492
two biggest companies in the industry, and they're growing at more than twice

00:27:02.492 --> 00:27:04.932
the rate of the industry average.

00:27:05.212 --> 00:27:10.472
So that is your marquee takeaway about how the retail performed this quarter.

00:27:11.343 --> 00:27:14.823
Yeah, if you, you and I always just kind of, we collaborated on a chart that

00:27:14.823 --> 00:27:19.483
was kind of tracking when would Amazon's GMV pass Walmart. I think they've passed

00:27:19.483 --> 00:27:21.963
each other a long time ago, right, from that perspective, but not,

00:27:22.083 --> 00:27:24.963
but has total revenue, hasn't total revenue actually gotten close to?

00:27:25.563 --> 00:27:29.183
Well, so, yeah, total revenue is getting close, but it, the,

00:27:29.283 --> 00:27:32.363
both of them have slightly not apples to apples numbers.

00:27:32.583 --> 00:27:36.663
So I would argue, like, for a long time it was, oh, they're passing the non-grocery

00:27:36.663 --> 00:27:41.583
revenue at Walmart because Walmart has grocery and Amazon did not. right?

00:27:42.143 --> 00:27:45.623
And then, you know, Amazon has really turned up the heat on grocery.

00:27:45.843 --> 00:27:51.723
And so now it's closer to apples to apples. So now Amazon is ahead of Walmart U.S.

00:27:52.163 --> 00:27:53.883
But Walmart Inc.

00:27:54.363 --> 00:27:59.303
Has Sam's Club revenue in the U.S. So if you add the U.S. Sam's Club revenue with U.S.

00:27:59.603 --> 00:28:03.523
Walmart revenue, depending on whose estimates you believe, they're super close.

00:28:03.803 --> 00:28:06.283
Depending on whose estimates you believe, it's neck and neck.

00:28:06.443 --> 00:28:08.563
And Walmart, we don't know their Q1 numbers yet.

00:28:08.703 --> 00:28:13.203
So we'll have to see if They're like, this is a big growth quarter for Amazon.

00:28:13.343 --> 00:28:17.923
We'll have to see if Walmart's able to keep up. But the general story that Walmart

00:28:17.923 --> 00:28:20.483
is also vastly outperforming the market is true.

00:28:20.663 --> 00:28:27.263
So the two largest players are outperforming and that creates a huge bifurcation in the market.

00:28:29.016 --> 00:28:33.016
Interesting. Cool. Anything in the fulfillment and delivery that tickled your fancy?

00:28:33.596 --> 00:28:38.336
Well, like my, my big takeaway is that they're getting the goods closer and

00:28:38.336 --> 00:28:41.516
closer to the consumer and they're delivering the goods faster and faster.

00:28:41.636 --> 00:28:43.996
Right. So they have all these vanity metrics.

00:28:44.156 --> 00:28:48.936
They like to talk about, about how, how much, how many goods they're delivering more quickly.

00:28:48.936 --> 00:28:53.356
So there there's now like 300 cities, if I'm remembering right,

00:28:53.576 --> 00:28:57.156
that are doing one hour delivery, including, you know, myself here in Chicago,

00:28:57.536 --> 00:29:00.696
there's like 2000 cities that are doing three hour delivery.

00:29:00.956 --> 00:29:07.796
And that's on like 90,000 items for same day delivery. They're in the millions.

00:29:08.036 --> 00:29:11.536
And so they, they took a shot, like, I assume that was aimed at Walmart where

00:29:11.536 --> 00:29:15.396
it was kind of funny where they, they said something like that's 10 times the

00:29:15.396 --> 00:29:19.896
assortment of items we deliver same day as you can get from a big box store.

00:29:21.036 --> 00:29:26.196
And so, so the amount of items that they can deliver fast and the speed at which

00:29:26.196 --> 00:29:29.136
fast is keep going up and up.

00:29:29.516 --> 00:29:33.016
And what's super interesting is the mix is changing super fast.

00:29:33.156 --> 00:29:39.496
So it used to be that it was predominantly general merchandise and not a lot of grocery.

00:29:39.696 --> 00:29:44.396
Now it's a lot of grocery, including fresh and frozen and perishable.

00:29:44.556 --> 00:29:48.056
So I think we'll talk about that a little bit later. But basically,

00:29:48.416 --> 00:29:55.336
the Amazon On retail story, the growth is largely coming from moving goods to

00:29:55.336 --> 00:30:00.816
closer to the customer, delivering faster, and therefore getting a bigger share of wallet.

00:30:01.216 --> 00:30:01.836
Got it.

00:30:02.866 --> 00:30:08.306
Yeah there's part of the thing i thought was interesting was this india there

00:30:08.306 --> 00:30:12.406
was one country okay it was tokyo this amazon now was really interesting it

00:30:12.406 --> 00:30:14.146
seemed like a it's in 12 countries,

00:30:14.866 --> 00:30:20.266
yeah what do they call our yeah what do they call go puff and that stuff here

00:30:20.266 --> 00:30:23.666
that's kind of like followed by the wayside a little bit uh instant.

00:30:23.666 --> 00:30:24.546
Commerce is that what.

00:30:24.546 --> 00:30:26.486
You mean generically yeah Yeah.

00:30:26.886 --> 00:30:27.766
Yeah. Quick commerce sometimes.

00:30:28.226 --> 00:30:32.826
Yeah. Is this instant slash quick commerce like more popular in these areas

00:30:32.826 --> 00:30:33.706
and that's why they're doing it?

00:30:33.706 --> 00:30:40.326
Yes, exactly. Well, so two things, different labor costs, which is complicated, right?

00:30:40.506 --> 00:30:47.386
So both, you know, the labor rate for deliverers in India and China is much lower than it is here.

00:30:47.626 --> 00:30:52.366
The average income is, of course, also much lower. So it's not like you have

00:30:52.366 --> 00:30:56.966
the same wealthy consumers ordering this stuff for instant delivery and it's

00:30:56.966 --> 00:30:58.166
just cheaper to deliver there.

00:30:58.426 --> 00:31:00.226
Like the economic model is very

00:31:00.226 --> 00:31:04.266
different, but it is more affordable to deliver stuff super fast there.

00:31:04.446 --> 00:31:10.886
And so both Amazon and Flipkart are competing significantly in this 30-minute

00:31:10.886 --> 00:31:16.426
category and consumers are adopting it and it's a big deal.

00:31:17.480 --> 00:31:21.900
Very cool. Anything jumped out at you on the revenue breakdown?

00:31:22.060 --> 00:31:23.740
You want me to tackle that or you want to jump in?

00:31:24.240 --> 00:31:30.600
Yeah, yeah, no. So the historically, you know, they've had this big online number

00:31:30.600 --> 00:31:32.700
and they've had a smaller physical number.

00:31:32.880 --> 00:31:39.440
The physical number used to have a lot of little retail concepts in it, like Amazon Go stores,

00:31:40.100 --> 00:31:43.500
Amazon Fresh stores, their grocery stores, they had the four star stores,

00:31:43.660 --> 00:31:46.820
they had fashion stores, they had a beauty salon, that all this stuff,

00:31:46.980 --> 00:31:49.920
they've closed the vast majority of those retail concepts.

00:31:50.180 --> 00:31:55.480
So today, physical retail at Amazon is almost exclusively Whole Foods.

00:31:55.740 --> 00:32:01.000
And so if you look at the Whole Foods number, it was up like 4.6%,

00:32:01.000 --> 00:32:04.900
which is actually pretty decent for Whole Foods.

00:32:05.040 --> 00:32:10.620
Whole Foods hasn't had like ginormous growth and that's a little faster than

00:32:10.620 --> 00:32:13.700
the industry average on growth, even for Whole Foods,

00:32:13.860 --> 00:32:18.840
which is kind of interesting and indicative of a potential kind of turnaround

00:32:18.840 --> 00:32:24.220
acceleration of Whole Foods, which has been kind of static for a while.

00:32:24.560 --> 00:32:28.760
So on the online versus physical, that to me is interesting.

00:32:29.060 --> 00:32:32.140
I want to say the third-party mix went down a little bit this quarter.

00:32:32.640 --> 00:32:37.340
It's still about 60% of what Amazon sells in the US is third-party stuff.

00:32:37.620 --> 00:32:42.380
And so I I think the fluctuation is a little variable, I would say,

00:32:42.520 --> 00:32:44.520
and there's not a lot of coverage from this from Amazon.

00:32:44.920 --> 00:32:49.320
There's a lot of controversy in the third party community because Amazon's been jacking up the fees.

00:32:49.480 --> 00:32:53.460
They famously added a fuel surcharge this quarter.

00:32:53.680 --> 00:32:58.360
And there's a strong sentiment that Amazon doesn't treat its third party sellers very well.

00:32:58.580 --> 00:33:03.400
And, you know, there was a time when Amazon spent a lot of narrative in these

00:33:03.400 --> 00:33:05.500
earnings calls talking about third party sellers.

00:33:05.500 --> 00:33:10.160
And it would be easy for them to feel like they were taken for granted in both

00:33:10.160 --> 00:33:16.220
Andy's shareholder letter this year and in the earnings call. So that's interesting.

00:33:17.445 --> 00:33:21.665
You know, subscription continues to grow. Both, they're adding new memberships,

00:33:21.785 --> 00:33:25.505
they're adding new services for Prime, and they're jacking up the rates on Prime.

00:33:25.685 --> 00:33:30.425
My Primer news this month, I just got my note about a higher price.

00:33:30.765 --> 00:33:35.925
And because of the shift to grocery, the unit sold is growing even faster than the goods.

00:33:36.685 --> 00:33:42.585
Yeah, very cool. Why do you think Whole Foods accelerated a little bit?

00:33:42.585 --> 00:33:47.345
So they have leaned into some operational efficiencies at Whole Foods.

00:33:47.585 --> 00:33:52.065
And Whole Foods was kind of like independently run stores where managers had

00:33:52.065 --> 00:33:57.125
a lot of autonomy and Amazon kind of famously rolled back some of that autonomy

00:33:57.125 --> 00:34:00.725
and people felt like that hurt the store experience.

00:34:00.725 --> 00:34:06.485
Well, you know, now they have, they have like Doug Harrington there, who's a real grocer.

00:34:06.665 --> 00:34:12.245
And they're really leaning into still keeping things federated as opposed to

00:34:12.245 --> 00:34:15.505
letting these be autonomous businesses, but doing a better job.

00:34:15.605 --> 00:34:17.205
They're inventing more foods.

00:34:17.385 --> 00:34:22.785
They're, they're improving the, the 365 private product and in Whole Foods.

00:34:22.785 --> 00:34:28.145
And they are now announcing for the first time, all their brick and mortar effort

00:34:28.145 --> 00:34:29.505
was on these new concepts.

00:34:29.845 --> 00:34:33.985
Now that Whole Foods is really their only concept, they're opening new Whole

00:34:33.985 --> 00:34:35.865
Foods in new markets for the first time ever.

00:34:36.145 --> 00:34:42.205
And that, I would argue, is actually the biggest Achilles heel of Whole Foods is just their reach.

00:34:42.365 --> 00:34:44.365
They're just not that close to that many consumers.

00:34:44.605 --> 00:34:49.385
And so, you know, the fastest way for a retailer that doesn't truly have a national

00:34:49.385 --> 00:34:53.385
footprint to grow is to open stores in new markets.

00:34:53.565 --> 00:34:56.705
And so I actually think you're going to see the rate of growth of Whole Foods

00:34:56.705 --> 00:35:00.145
go up as these new stores come online.

00:35:00.465 --> 00:35:01.105
Very cool.

00:35:02.166 --> 00:35:06.106
Yeah. They've done a lot of, you know, nothing super new there,

00:35:06.246 --> 00:35:08.206
but integrating the Amazon experience in there.

00:35:08.426 --> 00:35:14.166
So whenever I go do returns at Whole Foods, the line is like the longest part of the grocery store.

00:35:14.526 --> 00:35:14.646
Yeah.

00:35:14.766 --> 00:35:16.886
So maybe that's bringing some people in. Yeah.

00:35:17.086 --> 00:35:20.126
They keep tweaking it. I will say I personally am very sad.

00:35:20.446 --> 00:35:23.526
They're turning off one feature in those stores that I thought was really good,

00:35:23.626 --> 00:35:26.626
which is called Amazon One, which is the palm reader.

00:35:26.946 --> 00:35:28.666
Yeah, the palm. I could never get it to work.

00:35:28.666 --> 00:35:33.666
Yeah, that is why. They had a lot of operational trouble with it.

00:35:33.746 --> 00:35:38.066
But like when it worked, which it always worked for me, it was super convenient. It was fast.

00:35:38.226 --> 00:35:42.106
And it's still an annoying experience at Whole Foods. You got to give them some

00:35:42.106 --> 00:35:46.886
kind of payment method and you have to separately give them your Amazon Prime number.

00:35:47.206 --> 00:35:51.406
And with the Palm, you just waved your hand over the thing and it all magically happened.

00:35:52.486 --> 00:35:56.766
Yeah, not much, as you mentioned, on the marketplace side, not much really exciting

00:35:56.766 --> 00:35:59.906
there, just like kind of flat to down very ever so slightly.

00:36:01.385 --> 00:36:04.365
I didn't really even see Wall Street spend time on it because there's so much

00:36:04.365 --> 00:36:08.565
other stuff that the marketplace has kind of fallen by the wayside.

00:36:08.565 --> 00:36:10.545
It's just like not the exciting new thing anymore.

00:36:10.885 --> 00:36:15.825
I would argue that that is more broadly true of the entire retail category at Amazon.

00:36:16.745 --> 00:36:19.525
It's kind of a sideshow to the whole other stuff.

00:36:19.925 --> 00:36:24.285
Yeah, yeah. And maybe we'll come back to that at the end. But I would say the

00:36:24.285 --> 00:36:29.585
big standout thing, and they didn't spend a lot of time on it, per our last point.

00:36:29.765 --> 00:36:35.305
But the biggest news, the biggest thing to me in the whole Amazon retail ecosystem

00:36:35.305 --> 00:36:38.545
is their emergence as a credible grocer.

00:36:38.825 --> 00:36:43.905
And they threw out a good new stat in the earnings call, which is that cumulatively

00:36:43.905 --> 00:36:49.925
in the U.S. They sold $150 billion of groceries in 2025, which makes them the

00:36:49.925 --> 00:36:51.885
second largest grocer in the U.S.

00:36:52.065 --> 00:36:54.305
Behind Amazon. So that puts them ahead of Kroger.

00:36:54.825 --> 00:36:58.545
And that was absolutely far from true a year ago.

00:36:58.545 --> 00:37:05.225
So this big initiative they did to put climate controlled zones in all the fulfillment

00:37:05.225 --> 00:37:12.185
centers and the sortation centers and start delivering grocery with their general

00:37:12.185 --> 00:37:15.805
merchandise and having a unified experience and the faster delivery.

00:37:16.025 --> 00:37:23.385
All that is totally working and they've become the number two grocer in the U.S. And that's huge.

00:37:24.833 --> 00:37:28.133
Yeah and it did get kind of swept over yeah so i

00:37:28.133 --> 00:37:31.493
actually didn't see that so thanks for a reason though yeah the

00:37:31.493 --> 00:37:34.533
but what was the at the front uh

00:37:34.533 --> 00:37:37.953
if grocery was kind of the backstory on the back burner then

00:37:37.953 --> 00:37:43.593
aws was very much on the front burner with the gas turned to high it was the

00:37:43.593 --> 00:37:47.833
start of the show there's if you remember when we did our last show on amazon

00:37:47.833 --> 00:37:52.733
where we talked about the q4 earnings there was this concern right there was

00:37:52.733 --> 00:37:56.753
a bear case that kind of was winning in the Wall Street sentiment wars where they're like,

00:37:57.413 --> 00:38:00.493
yeah, you say you're capacity constrained, you're spinning all this,

00:38:00.633 --> 00:38:02.133
your margin is going to compress.

00:38:02.853 --> 00:38:09.593
You don't have open AI, you don't really have your own model, what's going on here?

00:38:10.013 --> 00:38:13.733
So they really eliminated all those concerns in one quarter,

00:38:13.873 --> 00:38:14.853
which is pretty amazing.

00:38:15.353 --> 00:38:21.513
So number one, AWS revenue accelerated, And it's on this kind of like linear

00:38:21.513 --> 00:38:24.013
acceleration path where if

00:38:24.013 --> 00:38:27.553
we go back a couple quarters, it was kind of at 17% year over year growth.

00:38:27.733 --> 00:38:32.693
Then it went to 20% and then to 24, which was pretty good in fourth quarter.

00:38:32.853 --> 00:38:35.693
And then here in Q1, it grew to 28% year over year.

00:38:35.913 --> 00:38:39.593
This is a thing that's already at like 40 billion and it's like accelerating.

00:38:39.793 --> 00:38:43.133
So that's the AI tailwind really starting to show up.

00:38:43.633 --> 00:38:47.833
But then everyone's always like, yeah, but your margins, margin, margin, margin.

00:38:48.073 --> 00:38:54.673
So this was the biggest surprise of the quarter on the beat was the AWS operating margin came in at 37.8.

00:38:54.833 --> 00:39:00.353
Everyone thought it was going to go down and it bumped up, which was pretty wild.

00:39:01.309 --> 00:39:05.809
One of the things driving that is they invested in their own chipset called

00:39:05.809 --> 00:39:09.529
trainium now this is a misnomer because you actually don't train ai with this

00:39:09.529 --> 00:39:10.569
thing it's an inference chip.

00:39:11.229 --> 00:39:15.069
But historically for some reason they called it trainium because you

00:39:15.069 --> 00:39:18.189
could use it for training but it actually ends up being better for inference back

00:39:18.189 --> 00:39:21.189
when ai was new everything was training so that's

00:39:21.189 --> 00:39:24.089
like no one no one really cared about inference but now that

00:39:24.089 --> 00:39:27.089
it's getting older running the ai models and

00:39:27.089 --> 00:39:30.589
scaling them has become more important than training and

00:39:30.589 --> 00:39:33.449
amazon ended up in a good place at a good time

00:39:33.449 --> 00:39:37.569
google has a similar chip called tpu and

00:39:37.569 --> 00:39:44.589
it is on a similar trajectory but i would say one of the areas that's become

00:39:44.589 --> 00:39:48.689
interesting a little bit for google but mostly amazon they now have people wanting

00:39:48.689 --> 00:39:53.829
to buy just the chips and so they actually want either Amazon to host a rack of these chips,

00:39:54.049 --> 00:39:57.209
which is a little bit outside of how AWS normally works is they're not usually

00:39:57.209 --> 00:39:59.949
like a hardware provider, right? They're a compute provider.

00:40:00.329 --> 00:40:03.209
And then they even said there's this huge demand for people to just,

00:40:03.309 --> 00:40:06.369
they just like want to buy them and host them themselves in their own data centers.

00:40:06.649 --> 00:40:09.389
This would be like the OpenAI's and Anthropics.

00:40:09.769 --> 00:40:12.209
We've kind of hinted at this, but I'll go ahead and explicitly say it.

00:40:12.289 --> 00:40:17.569
One of the big announcements within the AWS bucket is Amazon did get out of

00:40:17.569 --> 00:40:21.269
their exclusivity, excuse me, OpenAI got out of exclusivity with Microsoft.

00:40:21.669 --> 00:40:27.169
And now AWS has within AWS and the piece inside of there called Bedrock,

00:40:27.369 --> 00:40:32.509
you do have access to the OpenAI models now. And that's a huge win for Amazon.

00:40:32.909 --> 00:40:37.669
A lot of people speculate this is anticipation of OpenAI going public.

00:40:38.069 --> 00:40:44.049
And so that was a really big win within here as well, where everyone is pretty

00:40:44.049 --> 00:40:48.549
excited that, okay, all those little bear things that kind of added up to be,

00:40:48.609 --> 00:40:49.829
you know, some negativity.

00:40:50.529 --> 00:40:54.289
Every one of them got washed away in like a one hour phone call. It's kind of crazy.

00:40:54.649 --> 00:40:58.889
And then what really kind of like blew people's mind was they all disclosed

00:40:58.889 --> 00:41:00.989
this backlog, this backlog.

00:41:02.787 --> 00:41:05.987
Previously, you know, I think it was like 200 billion.

00:41:06.267 --> 00:41:09.567
So it was pretty big, but they basically said, it was kind of funny.

00:41:09.647 --> 00:41:12.747
It was in a Q&A. They just kind of dropped it in there because it usually comes

00:41:12.747 --> 00:41:14.787
out in one of the filings later.

00:41:15.147 --> 00:41:18.327
So one of the Wall Street guys said, hey, what's the backlog?

00:41:18.487 --> 00:41:21.047
And Jassy said, yeah, it's 364 billion.

00:41:21.527 --> 00:41:24.347
Remember, it used to be 200 billion. So it like doubled in one quarter.

00:41:24.767 --> 00:41:28.267
And then he said, so everyone always assumes there's a lot of things that are kind of baked in there.

00:41:28.407 --> 00:41:31.207
Like they did this big anthropic deal and they previously on

00:41:31.207 --> 00:41:33.907
the call talked about all this tranium then he said oh and

00:41:33.907 --> 00:41:37.587
by the way that doesn't include the 100 billion from anthropic and

00:41:37.587 --> 00:41:40.987
it doesn't include the 200 and something

00:41:40.987 --> 00:41:43.747
billion for tranium and everyone's like wait a minute

00:41:43.747 --> 00:41:52.227
if we add those in 364 plus 100 plus that that's like it was like 700 it got

00:41:52.227 --> 00:41:55.507
really weird hotly quiet on the conference call because everyone's like what

00:41:55.507 --> 00:42:01.087
is going on right here like like it was i don't even think wall street suggested all that yet

00:42:01.207 --> 00:42:03.587
because it's like such a big number.

00:42:03.767 --> 00:42:07.547
You're just kind of like, they almost have a, you know, there's a world where

00:42:07.547 --> 00:42:11.027
they could have a trillion dollars in backlog, which is just crazy.

00:42:11.467 --> 00:42:17.587
And this is for a business that's at, you know, doing like 40 billion a quarter.

00:42:17.767 --> 00:42:22.107
So it's at 160 run rate and they may have a billion dollars of backlog.

00:42:22.347 --> 00:42:23.647
That's just like mind blowing.

00:42:24.087 --> 00:42:26.567
Yeah. So there was just kind of like.

00:42:28.045 --> 00:42:35.585
And you could hear Jaws hitting the floor on that one. So even after the day,

00:42:35.585 --> 00:42:39.285
the 29th, here a day later, the stock is kind of on a bit of a run,

00:42:39.345 --> 00:42:40.465
which will be interesting to see.

00:42:41.245 --> 00:42:43.985
Another thing that we think usually should be on the front burner,

00:42:44.065 --> 00:42:47.705
but it was on the back burner for this, was advertising. What did you see there?

00:42:48.125 --> 00:42:52.105
Yeah, yeah. Yeah. So they didn't spend very much time talking about it,

00:42:52.205 --> 00:42:57.525
but it was another very solid quarter on the ad business, right?

00:42:57.685 --> 00:43:02.845
So for the quarter, they sold like $17.2 billion in ads, which is up like 22%.

00:43:03.385 --> 00:43:06.485
So these are very material big businesses.

00:43:06.905 --> 00:43:11.265
And I think people were kind of glossing over, you're not supposed to talk about

00:43:11.265 --> 00:43:15.505
this kind of growth, this big a business. And I mean, AWS being the marquee

00:43:15.505 --> 00:43:21.865
example, you're not supposed to be talking about these like 25% growth on these huge businesses.

00:43:22.265 --> 00:43:26.925
So ads continues to grow super fast.

00:43:27.205 --> 00:43:32.265
Their run rate now, if you look at the last 12 months, trailing 12 months,

00:43:32.405 --> 00:43:34.765
they're at like $72 billion ad business.

00:43:34.925 --> 00:43:41.805
So it's very rapidly catching up to the digital ad businesses at Google and

00:43:41.805 --> 00:43:45.905
Meta. It definitely is the third largest ad business out there.

00:43:46.105 --> 00:43:50.565
And one huge difference you have to remember between AWS and the ad business

00:43:50.565 --> 00:43:55.865
is the capital expense requirements for those two businesses,

00:43:56.025 --> 00:43:57.385
right? Like AWS is awesome.

00:43:57.645 --> 00:44:03.285
The problem is you've got to spend a huge amount of money up front on land and power and ships.

00:44:03.405 --> 00:44:08.885
And then you get this long-term payback on all of those investment years down

00:44:08.885 --> 00:44:14.625
the road. The ad business is almost free on top of the retail business, right?

00:44:14.945 --> 00:44:20.465
And so the profit from this ad business is on a per dollar basis is much better.

00:44:20.645 --> 00:44:24.365
People estimate it's at like 50% gross margin business.

00:44:24.685 --> 00:44:26.905
I actually think that potentially is conservative.

00:44:27.763 --> 00:44:31.523
And so usually what we talk about is even though the revenue from AWS is bigger

00:44:31.523 --> 00:44:35.423
than the revenue from ads, that the amount of earned income from ads is actually

00:44:35.423 --> 00:44:38.263
bigger than the amount of earned income from AWS.

00:44:38.563 --> 00:44:40.803
And I'm here to tell you that that's no longer true.

00:44:41.883 --> 00:44:50.023
Like AWS is growing so fast that it now is materially out contributing to the ad business.

00:44:50.023 --> 00:44:54.743
You definitely would want either of these businesses, but I want to say AWS

00:44:54.743 --> 00:45:02.843
contributes like, what did we say, like $14.1 billion in earned income.

00:45:03.203 --> 00:45:08.423
The ad business, if it's a 50% gross margin, is probably contributing about $8 billion.

00:45:08.683 --> 00:45:16.183
So AWS is almost twice as many dollars to the free cash flow as the ads business

00:45:16.183 --> 00:45:18.703
right now. So that is all super interesting.

00:45:20.023 --> 00:45:24.343
I guess, you know, there's some interesting things. Amazon mostly used to sell

00:45:24.343 --> 00:45:29.463
ads as sponsored product listings in the marketplace, which is still true.

00:45:29.663 --> 00:45:32.883
But increasingly, they're doing these interesting data partnerships.

00:45:33.103 --> 00:45:37.903
So they have a huge partnership with Netflix. So you can buy a Netflix audience

00:45:37.903 --> 00:45:42.703
ad on Amazon. And they have a huge partnership with Comcast.

00:45:42.863 --> 00:45:48.563
So you can use your Amazon purchase data to buy digital ads that show up on the Comcast network.

00:45:48.563 --> 00:45:53.103
So it's, they're definitely shifting from ads being kind of,

00:45:53.303 --> 00:45:58.583
you know, a core part of their retail business to ads being a standalone business.

00:45:59.883 --> 00:46:03.283
You know, what's interesting about all this ad stuff, you mentioned that for

00:46:03.283 --> 00:46:07.043
the first time Meta is ahead of Google, like all these ad businesses are accelerating.

00:46:07.303 --> 00:46:11.583
And then, you know, part of OpenAI is an IPO thesis, I think,

00:46:11.743 --> 00:46:16.783
the stuff I've seen is they're going to go from nothing to $100 billion ad business.

00:46:17.465 --> 00:46:20.525
Which, if anyone can do it, it's them. But then I think, man,

00:46:20.585 --> 00:46:25.885
they're up against some really crazy competition that didn't exist 18 months ago.

00:46:26.225 --> 00:46:28.805
So it's going to be interesting to see, can they carve that off?

00:46:28.885 --> 00:46:33.845
Where does it come from? Is it incremental from offline? And maybe that's a topic for another show.

00:46:33.925 --> 00:46:34.065
Yeah.

00:46:34.585 --> 00:46:37.045
It's just fascinating to me how this is going to play out.

00:46:37.205 --> 00:46:41.065
What I think is going to be super interesting is the very different circumstances.

00:46:41.505 --> 00:46:45.805
I'll call them the incumbents versus the hybrids versus the non-incumbents, right? Right.

00:46:45.985 --> 00:46:49.885
So Amazon, Google and Meta mainly make money from ads. Right.

00:46:49.985 --> 00:46:52.645
So they have a legacy ad business to protect.

00:46:52.965 --> 00:46:55.825
And as all of these new customer experiences come into the world,

00:46:56.045 --> 00:47:00.205
all of these agentic experiences, there's a huge risk that it will be harder

00:47:00.205 --> 00:47:02.285
to monetize those experiences with ads.

00:47:02.525 --> 00:47:07.665
So those those guys have a, you know, innovators dilemma about,

00:47:07.845 --> 00:47:09.885
you know, how fast they want to move to this new world.

00:47:10.365 --> 00:47:13.185
Amazon is kind of a hybrid, but they got called out.

00:47:13.365 --> 00:47:18.285
That was a question in the earnings call to Andy is, hey, what's going to happen

00:47:18.285 --> 00:47:22.225
to your ad business when all of this agentic stuff comes true?

00:47:22.505 --> 00:47:27.485
And Andy had to say, oh, my gosh, I think it's going to be good for the ad business

00:47:27.485 --> 00:47:30.605
because, A, it makes it cheaper to make an ad, right?

00:47:31.505 --> 00:47:35.145
Essentially, their first argument is everyone will have to pay less money to

00:47:35.145 --> 00:47:39.985
Publisus because the robots will make all the ads, right? Yep.

00:47:40.285 --> 00:47:43.805
The cost of the ads is not that material in the whole ad business.

00:47:44.045 --> 00:47:45.705
Right. So I wish it was more.

00:47:46.305 --> 00:47:51.685
But so so that's an interesting point. But I don't think it changes the economics for for Amazon anymore.

00:47:51.685 --> 00:47:55.585
And then what Andy was saying is what is interesting is, you know,

00:47:55.785 --> 00:47:59.985
people don't just do one one agentic prompt and then buy something that there's

00:47:59.985 --> 00:48:02.785
this bimodal back and forth and

00:48:02.785 --> 00:48:06.365
that there's a refining and that there's multiple iterations of prompts.

00:48:06.585 --> 00:48:10.525
And that one of the new things we have in our experience is suggested prompts.

00:48:10.665 --> 00:48:14.065
You give us a prompt and we suggest what your follow up should be.

00:48:14.065 --> 00:48:21.085
And he's actually suggesting and implying that sponsored suggested prompts may be,

00:48:21.859 --> 00:48:27.199
the, the primary way to monetize ads in the, in the agentic world.

00:48:27.399 --> 00:48:32.359
So I don't know. I think it's too early to, to see how consumers use all this

00:48:32.359 --> 00:48:36.179
stuff, but that that's an interesting thing to watch, right?

00:48:36.359 --> 00:48:39.519
Amazon has some ad revenue to protect.

00:48:39.699 --> 00:48:43.839
And so they have to be a little careful anthropic and open AI have no ad revenue

00:48:43.839 --> 00:48:45.099
or no meaningful ad revenue.

00:48:45.239 --> 00:48:50.099
Right. And so they get to do whatever makes the most sense to make money in the new world.

00:48:50.239 --> 00:48:54.119
And so I just think that's an interesting sort of different starting point that

00:48:54.119 --> 00:48:55.039
all these companies have.

00:48:57.156 --> 00:49:01.356
The other thing that was exciting to me, and this is going to be a shocker.

00:49:01.516 --> 00:49:02.316
Are you sitting down, Jason?

00:49:02.776 --> 00:49:03.576
I am. I am.

00:49:04.516 --> 00:49:08.236
The agentic commerce was the real star of the show. So AWS was pretty good.

00:49:08.276 --> 00:49:10.676
And then it was outstaged by agentic commerce.

00:49:10.756 --> 00:49:13.036
What is this agentic commerce you're talking about?

00:49:13.656 --> 00:49:19.476
Well, the flavor at Amazon is Rufus. So it's our little orange corgi friend there, Rufus.

00:49:20.156 --> 00:49:23.656
And they released a bunch of new data points. This was exciting,

00:49:23.816 --> 00:49:27.096
but they always change them. So there's never a linear line that you can draw,

00:49:27.256 --> 00:49:28.236
which kind of on purpose.

00:49:28.876 --> 00:49:32.476
So they previously had talked about some MAUs.

00:49:32.616 --> 00:49:36.376
This time they introduced, they said the number of users is up 115%.

00:49:36.376 --> 00:49:41.776
Last quarter, they said there's 300 million using it, but you can't tie a line

00:49:41.776 --> 00:49:44.996
here because that 115% is year over year. So yeah.

00:49:45.156 --> 00:49:47.696
And it's also monthly active users versus.

00:49:47.996 --> 00:49:50.936
Yeah. They've obfuscated everything, which is confusing. So,

00:49:51.296 --> 00:49:54.096
but you know, they want you to know there's a lot of momentum.

00:49:54.736 --> 00:49:57.696
The one that's maybe more interesting, and again, it's kind of like they didn't

00:49:57.696 --> 00:50:02.756
define it, but they said Rufus engagement is up 400%. Now, there's a third party

00:50:02.756 --> 00:50:06.116
called Sensor Tower, and they put out some really good data.

00:50:06.276 --> 00:50:09.516
And I'm working on a blog post kind of summarizing some stuff there that,

00:50:09.676 --> 00:50:14.576
you know, and there's a bit of you will cleverly and correctly point out the causality here.

00:50:14.756 --> 00:50:18.416
But, you know, they're basically pointing out the people rattling through Rufus

00:50:18.416 --> 00:50:19.956
have a super high conversion rate.

00:50:20.196 --> 00:50:25.156
Now, there's like, that's the causality. Like, is it, did they already intend

00:50:25.156 --> 00:50:26.516
to buy something when they went in there?

00:50:26.756 --> 00:50:30.996
And it, you know, we, we, unless you did a two audiences, you know,

00:50:31.196 --> 00:50:34.436
and, and you did kind of a double blind kind of thing, you wouldn't really know

00:50:34.436 --> 00:50:37.356
the causality, but there's a lot of implication.

00:50:37.356 --> 00:50:43.996
The causality is very strong that these systems are improving the matching of

00:50:43.996 --> 00:50:48.176
the shopper intent to the catalog and resulting in better outcomes,

00:50:48.196 --> 00:50:51.156
which I believe that. I do believe that's happening.

00:50:51.296 --> 00:50:53.636
It's kind of a question of how much and are they just picking off,

00:50:53.836 --> 00:50:55.536
cherry picking the best audience or not.

00:50:59.009 --> 00:51:03.409
Well, you're right. We call it the correlation versus causation question, right?

00:51:03.509 --> 00:51:07.129
Like, does Rufus cause people to have way higher buying intent?

00:51:07.289 --> 00:51:11.009
Or did the people that arrived at Amazon with way higher buying intent,

00:51:11.349 --> 00:51:16.029
were they more likely to use Rufus, right? And the answers, of course,

00:51:16.109 --> 00:51:21.309
somewhere where in between, I think Warren Buffett used to always tell this, what do you call it?

00:51:21.369 --> 00:51:26.809
The duck story about how like the ducks could believe they made it rain if you

00:51:26.809 --> 00:51:29.229
confuse correlation and causation.

00:51:30.109 --> 00:51:36.209
So, yeah, you got to take all of these successes with a grain of salt at the

00:51:36.209 --> 00:51:37.269
moment. But I think it's.

00:51:38.211 --> 00:51:42.011
It's directionally true that more people are trying this stuff and they're having

00:51:42.011 --> 00:51:44.931
good outcomes and they're coming back and using it more often.

00:51:45.851 --> 00:51:50.211
Yeah. And there's, you know, so the sensor folks have a, the sensor tower folks

00:51:50.211 --> 00:51:55.011
have like a lot of specifics, but they basically said Rufus users are 60% more

00:51:55.011 --> 00:51:56.931
likely to complete a purchase. So there you go.

00:51:57.271 --> 00:51:59.491
So take a little bit of a grain of salt on that one.

00:52:00.151 --> 00:52:03.591
They did announce a ton of stuff. So there's eight new features they rolled

00:52:03.591 --> 00:52:06.571
out just right before earnings, which I thought was interesting timing.

00:52:06.571 --> 00:52:09.571
You mentioned they now have sponsored products inside

00:52:09.571 --> 00:52:12.551
of rufus they have sponsored prompts now they have brand

00:52:12.551 --> 00:52:15.191
prompts and then they have this thing i haven't had a chance to

00:52:15.191 --> 00:52:17.871
try it yet but it's on my weekend things to do and it's

00:52:17.871 --> 00:52:20.511
called here are the highlights where if you have a certain type of

00:52:20.511 --> 00:52:23.331
product it will and this has to be it's let's

00:52:23.331 --> 00:52:26.311
see it's on the mobile app and there's

00:52:26.311 --> 00:52:29.851
only on certain skews so it takes a bit to find it but they

00:52:29.851 --> 00:52:32.611
you can actually have it create if you've ever

00:52:32.611 --> 00:52:35.511
used notebook lm it creates a little podcast about the

00:52:35.511 --> 00:52:38.311
product so they announced here that they now have quote

00:52:38.311 --> 00:52:41.511
unquote millions of customers using it and they've streamed over 40 million

00:52:41.511 --> 00:52:46.291
minutes of content around that which was interesting and you can actually you

00:52:46.291 --> 00:52:50.311
know a multimodal verbally chat with the product catalog which is kind of interesting

00:52:50.311 --> 00:52:55.291
so you could say you know hey these headphones what is their hiring you know

00:52:55.291 --> 00:52:58.451
you could ask it all kinds of questions there's also a bunch of people on YouTube

00:52:58.451 --> 00:52:59.731
that are trying to get it to,

00:53:00.011 --> 00:53:04.431
they'll go pick a embarrassing personal product and try to ask it a bunch of

00:53:04.431 --> 00:53:05.271
embarrassing questions.

00:53:05.411 --> 00:53:08.651
And it does surprisingly good not falling into a bunch of traps there.

00:53:08.791 --> 00:53:12.971
So if you want like some sophomoric humor that you and I would never associate

00:53:12.971 --> 00:53:16.451
ourselves with, there's a lot of funny videos out there about that.

00:53:19.311 --> 00:53:21.731
What was interesting to me, and this is kind of frustrating,

00:53:22.031 --> 00:53:25.391
is Jassy continues to throw, So this was new.

00:53:25.551 --> 00:53:28.951
He's now calling Chachapiti and their elk horizontal agents,

00:53:28.971 --> 00:53:29.751
which I thought was interesting.

00:53:30.791 --> 00:53:35.471
And that's what I've been calling him for a while. So obviously it's from listening to the podcast.

00:53:35.771 --> 00:53:41.071
And he keeps kind of saying they don't know anything about products.

00:53:41.191 --> 00:53:45.011
They always get the price wrong and all these things. And they can't tell you

00:53:45.011 --> 00:53:45.711
when you're going to get it.

00:53:46.091 --> 00:53:49.111
That's just like essentially not true. So they're actually pretty good at all

00:53:49.111 --> 00:53:53.071
those things. So I do worry that he lives in his little Amazon bubble.

00:53:53.411 --> 00:53:57.811
And, you know, no one there at Amazon has written a six-page memo to kind of

00:53:57.811 --> 00:54:00.551
tell him he's wrong on that. So all of our Amazon listeners,

00:54:00.871 --> 00:54:04.291
one of you be brave and write a six pager for Jassy to fix that. Thank you.

00:54:05.551 --> 00:54:09.391
They did also, we teased this at the top. Here's the big payoff.

00:54:09.851 --> 00:54:15.091
They are in UCP. So that's really interesting. So the way I would think about

00:54:15.091 --> 00:54:19.051
this is what Amazon has decided to do, and we've talked about this,

00:54:19.251 --> 00:54:24.051
is they are blocking all the other folks from crawling them,

00:54:24.131 --> 00:54:25.931
but they are allowing data in.

00:54:25.931 --> 00:54:29.191
So they have this thing called ShopDirect or Direct Shop. I can never get those

00:54:29.191 --> 00:54:30.071
words in the right order.

00:54:30.391 --> 00:54:34.331
And then they have a Buy From Me in there. The Buy From Me is the last remaining

00:54:34.331 --> 00:54:38.431
vestige of a browser-based agentic purchase mechanism out there.

00:54:38.971 --> 00:54:43.591
And Perplexity had one. They've replaced that with more server-to-server.

00:54:43.711 --> 00:54:46.031
And then Gemini has done the same thing with UCP.

00:54:46.531 --> 00:54:50.271
I take the signal of them. This is me speculating. This is not announced.

00:54:50.431 --> 00:54:53.191
They did announce they're in the UCP partnership, but not what they're going

00:54:53.191 --> 00:54:58.131
to do with it. I think you will be able to buy, there'll be a new thing. So we've had 1P and 3P.

00:54:58.391 --> 00:55:02.351
There's going to be a new, you know, direct shop or shop direct,

00:55:02.351 --> 00:55:07.451
I can't remember, thing where you can, you can, using UCP, you can check out

00:55:07.451 --> 00:55:11.111
right on Amazon from brands that don't really want to sell on Amazon.

00:55:11.311 --> 00:55:15.171
They're going to pull them in. And what they're doing is they're doing an asymmetrical

00:55:15.171 --> 00:55:18.511
information war where they're going to go subsume.

00:55:18.551 --> 00:55:22.111
I call it embrace, extend, and extinguish. This was a famous Microsoft strategy.

00:55:22.451 --> 00:55:27.931
They're embracing agentic commerce horizontally so they can get all the UCP inventory.

00:55:28.051 --> 00:55:31.611
So now you'll have all the Amazon and the UCP, whereas Google,

00:55:31.711 --> 00:55:35.011
who I think they view as their main competitor, will only have the UCP inventory.

00:55:35.876 --> 00:55:40.196
So it's actually a brilliant strategy because if you believe selection is what's

00:55:40.196 --> 00:55:46.076
matter, it closes off their flank from an attack on selection by having the

00:55:46.076 --> 00:55:47.736
actual selection that's all in UCP.

00:55:47.856 --> 00:55:51.356
But it also doesn't allow a frontal attack because they're protecting their selection.

00:55:51.576 --> 00:55:55.636
So it's really interesting from a strategic standpoint to see this play out.

00:55:56.496 --> 00:56:01.516
Yeah, absolutely. I would say on the UCP thing, again, too early to know,

00:56:01.756 --> 00:56:05.576
but I would tend to agree with you. I think they're going to be consuming a

00:56:05.576 --> 00:56:09.956
lot more UCP feeds than they're going to be publishing UCP feeds.

00:56:11.156 --> 00:56:15.156
And so, you know, it's still they're smart to be in there.

00:56:15.316 --> 00:56:18.356
They're smart to be shaping it. Right. Like they're they don't know what the

00:56:18.356 --> 00:56:21.356
future is going to be. Maybe they will have to sell through UCP one day.

00:56:21.636 --> 00:56:25.836
And it's in their vested interest to make it a good functional protocol.

00:56:26.176 --> 00:56:33.296
Like for sure, it's the last draw in like a de facto winner in the in the protocol wars. right?

00:56:33.456 --> 00:56:39.576
Because, you know, OpenAI launched ACP and, you know, all of the ACP partners

00:56:39.576 --> 00:56:41.056
have now moved over to UCP.

00:56:41.256 --> 00:56:46.496
It was a more robust technical protocol just anyway. And now it's got all the industry support.

00:56:46.656 --> 00:56:52.916
So I kind of look at the protocol wars as a repeat of the beta versus VHS wars.

00:56:53.076 --> 00:56:57.696
And the only difference is in the beta versus VHS, the VHS had all the good

00:56:57.696 --> 00:57:01.396
partnerships, but beta had the technical superiority. And it turns out the industry

00:57:01.396 --> 00:57:04.056
partnerships won over the tech superiority.

00:57:04.456 --> 00:57:11.676
In these protocol wars, both the UCP is the better protocol and it has the better support.

00:57:11.856 --> 00:57:15.676
So it seems like we're all better off that it won. I do want to go back though,

00:57:16.016 --> 00:57:20.136
on the Andy Jassy stance on horizontal agents, because I think people need to

00:57:20.136 --> 00:57:21.216
pay close attention here.

00:57:21.516 --> 00:57:24.196
You know, essentially what he's saying is he keeps saying.

00:57:24.893 --> 00:57:29.033
Right now, Amazon does not participate with the horizontal agents at all.

00:57:29.213 --> 00:57:32.033
And he keeps saying, oh, it's coming. We're negotiating with them.

00:57:32.133 --> 00:57:33.293
We're trying to work out things.

00:57:33.453 --> 00:57:37.633
We see a future where we do work with those. But we think we're going to win.

00:57:37.773 --> 00:57:42.313
We think we know way more about the products and the purchase intent and the

00:57:42.313 --> 00:57:44.853
purchase outcomes than the horizontal agents.

00:57:45.073 --> 00:57:48.453
And customers are just going to prefer our experience, right?

00:57:48.593 --> 00:57:53.213
And so his position is we have a right to win. you're going to pick Amazon first,

00:57:53.313 --> 00:57:57.673
go to Amazon, and then have an experience on Amazon because we know more about the products.

00:57:57.853 --> 00:58:05.233
And while I agree with you, I think he's overestimating how bad the product

00:58:05.233 --> 00:58:06.733
data is in the rest of the world.

00:58:06.893 --> 00:58:10.053
Of course, there are problems with product data in and outside of Amazon.

00:58:10.413 --> 00:58:13.873
He's overestimating how bad it is in the rest of the world, and I don't think

00:58:13.873 --> 00:58:15.953
that's going to be the moat that's going to cause him to win.

00:58:16.703 --> 00:58:23.983
He is right that at the moment, Amazon knows more about that purchase intent

00:58:23.983 --> 00:58:26.183
than likely OpenAI does.

00:58:26.603 --> 00:58:32.583
But what he's completely glossing over is OpenAI knows a lot more about the

00:58:32.583 --> 00:58:35.283
rest of our life than Amazon does, right?

00:58:35.503 --> 00:58:39.583
And, you know, OpenAI knows what medical conditions we have and that we've asked

00:58:39.583 --> 00:58:41.763
about. They know what vacations we're planning.

00:58:42.003 --> 00:58:47.363
They know what diet we're trying to get on. And so while Amazon might start

00:58:47.363 --> 00:58:50.203
with a competitive advantage in shopping intent data,

00:58:50.743 --> 00:58:58.463
OpenAI has way more context and context and relevance for the rest of our life

00:58:58.463 --> 00:59:01.503
that impacts what products we might buy and use.

00:59:01.503 --> 00:59:06.123
And so I actually, if I had to bet right now, and I think I said this in a LinkedIn post,

00:59:06.123 --> 00:59:12.443
I think it's going to be easier for OpenAI and Google to fix their purchase

00:59:12.443 --> 00:59:18.723
intent gap than it is going to be for Amazon to fix its life context gap.

00:59:18.923 --> 00:59:23.463
And so, you know, I think this horizontal versus vertical bots is going to be

00:59:23.463 --> 00:59:27.343
an interesting battle. But if I had to bet right now, I would bet on the horizontal

00:59:27.343 --> 00:59:29.803
agents to win this in the long run.

00:59:30.323 --> 00:59:34.563
Yeah, I agree. Like, even to your point at the top where you went to a Pupilasys

00:59:34.563 --> 00:59:37.403
healthcare thing and, like, Chachupi knows all your health stuff, right?

00:59:37.743 --> 00:59:41.883
Like, who's going to be better at recommending a medicine for you or, you know?

00:59:41.923 --> 00:59:45.523
Yeah. When I ask for a sunscreen, it knows my kid has eczema,

00:59:45.763 --> 00:59:46.843
right? Like, I didn't, you know.

00:59:47.323 --> 00:59:49.823
Yeah. Amazon doesn't know that unless you specifically, you know,

00:59:49.963 --> 00:59:52.503
it picked it out of some prior search thing, which it could.

00:59:52.803 --> 00:59:54.383
But they're going to start to get...

00:59:55.131 --> 00:59:58.831
They need to elevate and become a personal agent for everything,

00:59:59.071 --> 01:00:03.911
which I think ultimately, I won't say her name, but A-L-E-X-A,

01:00:04.691 --> 01:00:07.191
you know, I think they'll have to do something there.

01:00:07.431 --> 01:00:07.751
Yeah.

01:00:08.031 --> 01:00:10.591
And it's just like really not keeping up with that by any means.

01:00:10.791 --> 01:00:14.771
No, although one tiny tidbit on that particular one, they did have a new data

01:00:14.771 --> 01:00:18.431
point, which is that the plus version, which we all have agreed is much better.

01:00:18.751 --> 01:00:23.111
They're saying it has 3x the conversion rate that the traditional one did.

01:00:23.111 --> 01:00:25.831
So it is not shocking because the original one was pretty bad,

01:00:25.951 --> 01:00:28.971
but the plus version is apparently selling more goods.

01:00:29.471 --> 01:00:35.171
Good. And then we're up against time. So I'm going to like just go through this last part fast.

01:00:35.411 --> 01:00:39.231
You've probably guessed from the recap at the top, but when you sum it,

01:00:39.431 --> 01:00:43.931
all the spending on AI is just massive. It's like now 700 billion.

01:00:44.171 --> 01:00:47.831
So it's getting to be ridiculous numbers, but the backlog is there,

01:00:47.971 --> 01:00:53.051
right? So just, I only spent detail on Amazon's backlog, but everyone has a

01:00:53.051 --> 01:00:54.251
crazy backlog right now.

01:00:54.391 --> 01:00:57.491
So there's definitely this wall of spending behind this investment.

01:00:57.751 --> 01:01:01.411
So I think it dispelled this AI bubble notion, at least in my mind.

01:01:02.111 --> 01:01:05.551
Ford guidance for Amazon, they're always conservative. This was a beaten bracket.

01:01:05.691 --> 01:01:08.171
So even though they like crushed it on earnings and everything,

01:01:08.571 --> 01:01:10.251
they came out a little more conservative.

01:01:10.511 --> 01:01:14.071
They kind of threw, they always do, you know, when they have a great quarter,

01:01:14.191 --> 01:01:17.691
they try to throw a blanket on it so that expectations don't run away.

01:01:17.691 --> 01:01:21.471
So they talked about memory costs. They've got their low Earth orbit thing.

01:01:21.751 --> 01:01:25.511
They've got fuel transportation costs. They've got a lot going on.

01:01:26.371 --> 01:01:31.071
So, you know, we'll see. So we'll be back in a quarter in 90 days and kind of

01:01:31.071 --> 01:01:31.951
let you know how that went.

01:01:32.351 --> 01:01:34.691
Anything else from the quarter you wanted to cover?

01:01:34.831 --> 01:01:35.431
Yeah, the only thing.

01:01:36.691 --> 01:01:40.471
Looking at all of this in its totality, I think the most interesting thing,

01:01:40.591 --> 01:01:46.591
which people are not talking about a lot, is how how little Amazon is talking

01:01:46.591 --> 01:01:48.651
about and thinking about retail and all of this.

01:01:49.491 --> 01:01:54.691
So I know we we live and breathe the agent of commerce piece and and it's still

01:01:54.691 --> 01:01:58.871
a huge, highly profitable business that drives a lot of other things for for Amazon.

01:01:58.871 --> 01:02:05.131
But the two stark things for me, Andy Jassy does an annual shareholder's letter

01:02:05.131 --> 01:02:07.051
that he took over from Jeff Bezos.

01:02:07.211 --> 01:02:10.651
And this was this document that I used to look forward to that was super insightful

01:02:10.651 --> 01:02:11.691
and interesting every year.

01:02:11.891 --> 01:02:17.311
This year's earning annual letter that came out last month did not mention retail once.

01:02:17.971 --> 01:02:24.391
It was exclusively about these new businesses at Amazon. And then in their earnings

01:02:24.391 --> 01:02:26.631
call, it's a 60-minute call.

01:02:26.811 --> 01:02:30.271
40 minutes of it are content and then 20 are Q&A.

01:02:30.531 --> 01:02:34.851
Do you know how many minutes they spent on retail in that 40-minute upfront

01:02:34.851 --> 01:02:36.871
section? Three and a half minutes.

01:02:37.271 --> 01:02:39.431
Oh, did you have a little retail geek here?

01:02:40.091 --> 01:02:44.171
No, I'm okay with it. But because here's what I think is funny.

01:02:44.391 --> 01:02:48.951
Like on this podcast for years, people are always, who's going to disrupt Amazon?

01:02:49.111 --> 01:02:55.451
What's going to disrupt Amazon? And five years ago, my answer was potentially

01:02:55.451 --> 01:02:59.871
their other businesses get so big that retail just becomes immaterial and they

01:02:59.871 --> 01:03:01.131
stop paying attention to it.

01:03:01.931 --> 01:03:05.911
And I feel like that in some ways is happening. It's still a huge business.

01:03:06.111 --> 01:03:09.651
If they stop paying attention to it in its entirety, it would take a long time

01:03:09.651 --> 01:03:11.591
to depreciate and wind down.

01:03:11.771 --> 01:03:16.071
And I'm not saying they're losing all momentum. I mean, their growth rate is

01:03:16.071 --> 01:03:19.831
accelerating at the moment, but what I am saying is as a

01:03:20.239 --> 01:03:27.039
percentage of the attention for the CEO, we may have passed the moment of peak retail at Amazon.

01:03:27.379 --> 01:03:30.959
And so I suspect that Amazon is going to get less cycles from Andy.

01:03:31.099 --> 01:03:34.939
Retail is going to get less cycles from Andy Jassy every quarter for the rest

01:03:34.939 --> 01:03:41.199
of time and less cycles from their board and less cycles from their S team than ever before.

01:03:41.239 --> 01:03:47.319
You know, just by virtue of how big and exciting these other established businesses

01:03:47.319 --> 01:03:52.499
are and how big and potentially big these two or three new businesses are.

01:03:53.459 --> 01:03:57.259
Yeah. So I can't remember if it was this quarter or on some things.

01:03:57.759 --> 01:04:01.179
He's kind of started, and his background is from the AWS side of things, right?

01:04:01.239 --> 01:04:06.399
So this is kind of a natural progression, but he's kind of, his framing is like,

01:04:06.519 --> 01:04:09.719
he kind of says the retail, the store, he calls it the store.

01:04:10.139 --> 01:04:13.579
He's like, the store is one of our bigger customers on AWS is kind of like how

01:04:13.579 --> 01:04:17.099
he thinks about it. So it's kind of gone from the engine pulling the whole entity

01:04:17.099 --> 01:04:22.259
forward to like one of the many customers of AWS and he calls it the store. So it's kind of funny.

01:04:23.139 --> 01:04:23.499
Yeah.

01:04:23.659 --> 01:04:25.739
The first time he said that, I was like, what store is he talking about?

01:04:25.899 --> 01:04:26.939
And I was like, oh, the store.

01:04:27.119 --> 01:04:27.999
Capital T-H-E.

01:04:28.159 --> 01:04:32.079
Yeah, the store. Yeah, that's a pretty big honking store you got there, Andy.

01:04:33.539 --> 01:04:36.739
So, yeah, so I thought that was an interesting framing that it's just basically

01:04:36.739 --> 01:04:40.159
yet another customer of AWS over there just doing his thing.

01:04:41.199 --> 01:04:41.559
Yeah.

01:04:42.359 --> 01:04:46.399
And so the other lightning round things you want to hit on before we call it a day?

01:04:46.639 --> 01:04:49.919
No, I think we've used up more than our allotted time, Scott.

01:04:50.099 --> 01:04:53.639
So as we always say, if you found value in this, we sure would appreciate it

01:04:53.639 --> 01:04:55.719
if you jump on iTunes. They still accept reviews.

01:04:55.899 --> 01:04:59.859
Believe it or not, 12 years later, you can still still write a favorable review

01:04:59.859 --> 01:05:01.019
of the Jason and Scott show.

01:05:01.559 --> 01:05:05.259
And if we get enough reviews, maybe we'll do more frequent episodes.

01:05:05.839 --> 01:05:08.879
Yeah, they're actually hard to find. So think of it as a mental puzzle to see

01:05:08.879 --> 01:05:12.939
if you can figure out how to leave a review on Apple Podcasts.

01:05:13.019 --> 01:05:14.639
They've hidden it, so good luck.

01:05:15.019 --> 01:05:18.619
Yeah, and until next time, happy commercing.