Feb. 6, 2026

EP336 - Amazon Q4 Earnings

EP336 - Amazon Q4 Earnings

EP336 - Amazon Q4 Earnings Chapters Welcome to the Jason and Scott Show NRF Highlights and Personal Updates Upcoming Conferences and Events Anthropic's Super Bowl Ads Claude Bot and Agentic Technology Amazon Earnings Overview Meta's...

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EP336 - Amazon Q4 Earnings

Chapters

0:31 Welcome to the Jason and Scott Show
3:28 NRF Highlights and Personal Updates
5:54 Upcoming Conferences and Events
9:15 Anthropic's Super Bowl Ads
16:11 Claude Bot and Agentic Technology
16:42 Amazon Earnings Overview
23:32 Meta's Advertising Strategies
27:32 Google's AI Developments
35:45 Amazon's Earnings Call Insights
44:29 Retail Growth and Essentials
48:20 Marketplace Dynamics
49:42 AWS Performance and Challenges
54:26 Amazon's Advertising Business
1:00:31 Agentic Commerce and Future Predictions
1:13:43 Walmart Leadership Changes and Implication

Welcome to a new installment of the Jason and Scot Show! In this special episode recorded on February 6th, 2026, hosts Jason Goldberg and Scot Wingo reconnect for an enlightening discussion following their experiences at the NRF and share key industry insights. This episode is packed with updates on Amazon's recent earnings call, the advertising landscape, and the emerging role of agentic commerce in the retail world.

Join Jason and Scot as they kick off the episode by reflecting on their time at NRF, where Jason delivered an impactful keynote that had listeners buzzing. In a light-hearted banter, they dive into personal stories, including the often-asked question about Jason's son’s sunburn during their recent Hawaiian vacation. From there, the conversation takes a deep dive into the evolving nature of retail, where both hosts express their excitement over how businesses are embracing the latest innovations in technology and AI.

The duo then brings their focus to Amazon's latest earnings report, which revealed a robust growth in retail despite an ominous forecast for capital expenditures. While they discuss the implications of Amazon's projected $200 billion in investments—including expansion into AI infrastructure, fulfillment centers, and essential goods—Jason and Scot analyze whether Wall Street's reaction of an 8% drop was justifiable considering Amazon’s overall performance in retail and advertising.

Listeners will gain valuable insights on how Amazon's grocery strategies and its dominance in everyday essentials have created a competitive landscape that mirrors historic retail expansions, like Walmart's grocery initiative. The hosts also emphasize the relevance of the Amazon Marketplace, where third-party sellers are taking up 62% of total units sold, highlighting the synergistic effect between advertising and retail performance.

The podcast also delves into the broader context of the e-commerce space, touching on AWS growth dynamics, the challenges posed by capacity constraints, and how they contribute to the narratives surrounding AI integration. With mentions of Anthropic's recent ad campaigns and competitor movements, listeners will appreciate the comprehensive look at the competitive dynamics shaping the industry.

Throughout the episode, Jason and Scot maintain an engaging dialogue on the potential of agentic commerce, discussing the opportunities for businesses to adapt and innovate in a rapidly changing environment. Their analysis of the demand for AI-driven tools and the importance of maintaining consumer experiences culminates in a call to reflect on the value of assortment and the implications of shifting consumer behaviors.

In conclusion, Episode 336 serves as both a detailed recap of Amazon’s recent performance and a broader commentary on the evolution within the e-commerce sector. With thought-provoking insights and a playful rapport, Jason and Scot ensure that listeners walk away with both the latest news and a deeper understanding of where the retail industry is headed.

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.

http://jasonandscot.com

WEBVTT

00:00:23.140 --> 00:00:29.360
Welcome to the Jason and Scott Show. This is episode 336 being recorded on Friday,

00:00:29.660 --> 00:00:31.660
February 6th. That's a lot of sixes.

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I'm your host, Jason Retailgeek Goldberg.

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And as usual, I'm here with your co-host, Scot Wingo.

00:00:38.680 --> 00:00:42.440
Hey, Jason, and welcome back, Jason and Scott Show listeners.

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Jason, my 2026 is off to an awesome start. I got to hang out with you for the

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first time in a long time at the National Retailer Federation. We had a great time.

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We did. That is how NRF in the beginning of the year are meant to be,

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is you and I getting to spend some time together.

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I didn't realize how much I was missing the couple of years that you were too big and fancy for us.

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Yeah. And if you didn't catch Jason's keynote, which we put across all of our

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media empire, it was an audio here on the Jason Scott show.

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It's on the YouTube and audio channel for Retail Gentic.

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It has been a very popular keynote. There was no one in the room,

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But man, people liked it in the replay.

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Yeah. But remember, Scott, we pretended in the recording like it was a full

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room. So don't, don't ruin the illusion.

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Yeah, I did this. I cut in, we spliced on the video, we spliced in some random

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shots of a Super Bowl stance just to kind of, you know, give you.

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Yeah. If you're wondering why everyone's holding a beer and a hot dog for my keynote.

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They're wearing like 49ers jerseys and stuff. Exactly.

00:01:47.080 --> 00:01:48.660
Not 49ers, but okay. Yeah.

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Next. I was thinking it would be a previous year. It's not the one that's coming.

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Fair.

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The but in all seriousness it was a great keynote it was i haven't seen you

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do your thing in a while and you've you've gotten better you're always good but it was really good.

00:02:03.300 --> 00:02:06.960
Oh that's super nice of you to say thank you it's it's always fun talking about

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these topics obviously like a lot of the those topics were developed in conversations

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with you and many of our other smart friends so i'm grateful for the network

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of smart people i have that helped me put it together the.

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Number one question we've been asked in the YouTube comments.

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Everyone would like to know if your son got a sunburner or not in your trip to Hawaii.

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That's like the number one question out of the keynote. I thought it was going

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to be something kind of, you know, about ACP or UCP or one of these authentic

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commerce kind of things.

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But really, everyone is very concerned about your son's skin health.

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The personal stories. And no, he did not.

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As you know, my wife is Lebanese, So we call my son a lebahonky.

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So he has more natural melatonin protection than I do. I'm the most likely person

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in our family to get a sunburn.

00:02:55.200 --> 00:02:59.020
Well, I know this will be in the comments for this episode. So did you get a sunburn?

00:02:59.340 --> 00:03:01.000
Yes. Okay, good.

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You went to all that trouble to use Agenda Commerce to find the perfect sunscreen

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and you didn't put any on you.

00:03:07.240 --> 00:03:12.040
Well, yes, that, yes. I did use sunscreen, just not diligently enough.

00:03:12.580 --> 00:03:17.120
Yeah, I found a... There's a little spot up top that sometimes gets sunburned.

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I'm not really used to putting sunscreen up there.

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Yes, I grew up.

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The balding hair area.

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Yes, yes, I'm, yes. We had more protection at one point than we do now.

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How about any other trip reports? I'm going to Shop Talk coming up in March,

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but sadly you won't be there because you've got spring break where you'll be

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getting yet another sunburn.

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Yes, yes, I'll be updating all those pictures for next year's keynote as if

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they would invite me back.

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Yeah, unfortunately I am missing

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Shop Talk again, which I'm super sad about. I do have FOMO for that.

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I've been on the road every week, but honestly, it's all been like at the beginning

00:03:57.980 --> 00:04:01.860
of the year, every one of our clients like kicks off their year and very frequently

00:04:01.860 --> 00:04:06.280
they have all hands meetings or, you know, national sales meetings.

00:04:06.540 --> 00:04:10.100
And so I'm kind of going from event to event,

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which is a grind in some ways, but it's awesome in some ways because they're

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all now thinking about all the same things that you and I have been thinking

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about and talking about for a year.

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And they have a bunch of, you know, new smart people looking at the same problems

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from different angles. And so it's been...

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It's exciting to see how every brand is applying all of these potentially disruptive

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changes to their unique circumstances and coming up with different plans and

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different strategies and different ways to tell the story.

00:04:41.790 --> 00:04:45.350
I feel like we were total nerds talking about something that no one else cared

00:04:45.350 --> 00:04:49.830
about a year ago, and now that topic has suddenly become cool and the cool kids

00:04:49.830 --> 00:04:51.270
want to talk about it. So that's fun.

00:04:51.810 --> 00:04:55.490
Yeah, I like to reframe it as we're prediction geniuses, especially when we're

00:04:55.490 --> 00:04:58.810
right. And if we're wrong, we don't really talk about it again. So there you go.

00:04:59.210 --> 00:04:59.430
Yes.

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That's a little inside info on how you get to be a good predictor. Hi, everybody.

00:05:03.430 --> 00:05:07.750
Yes. Says the guy that claims he's too busy to record the episode to see how

00:05:07.750 --> 00:05:09.870
well, how good his predictions were last year.

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That was you. You're on a, you're always on a flight. You've spent 11 days on

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a plane. Back to back. I did the math.

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Yeah. Yeah. That was impressive. Impressive, man.

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I'm also going to the Digital Shelf Summit. And so I guess we won't see each

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other until retail club. So we're both going to be at retail club and that'll be fun.

00:05:28.750 --> 00:05:33.150
Yeah. But I actually think it's only semi-private, but I think we're doing a

00:05:33.150 --> 00:05:34.750
Citibank conference together. Are we not?

00:05:35.310 --> 00:05:37.610
Yeah. Yeah, we are. Yeah. Yeah.

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Oh, are you keeping that secret?

00:05:39.570 --> 00:05:42.290
No, I just don't think the average person can just go to that one.

00:05:42.490 --> 00:05:42.750
Okay.

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You have to be a city client, but I don't know. All you city clients,

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come on down. I think having a credit card is enough. I'm sure they'll welcome you in.

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Or a dollar to invest. To be clear, none of our listeners are average people.

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They're all above average, of course.

00:05:56.490 --> 00:05:59.790
Yeah, but I certainly am looking forward to Retail Club. That's going to be

00:05:59.790 --> 00:06:03.350
a fun one this year. Although that's quite a ways down the road. Yeah.

00:06:03.750 --> 00:06:08.970
And then the other big news I wanted to pick your brain on is Anthropic came

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out this week with some savage Superbowl ads that basically attack pretty much, uh,

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attack Chachubuti straight on that they're going to have ads and Claude is not.

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And they, they're, they're probably the most clever creative I've seen where,

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you know, they, they perfectly capture the, the sycophantic nature of ChatGPT.

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And then they also inappropriately introduce ads and it creates these really good comedy moments.

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The acting on it is all great. The writing and acting and everything is really

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good. Have you seen those guys yet?

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I have. It's pretty funny. I'm super looking forward to this Super Bowl.

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In my industry, obviously, the Super Bowl is always a big deal,

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but there are some years when the stuff going on in the Super Bowl overlaps

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with your and I's interests more than others.

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And so there's some years where it's super exciting for the advertising industry,

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but it's kind of a nothing burger for us.

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There's some years when like a bunch of dot coms like show up in the Super Bowl

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ads for the first time or, you know, Timu showing up in the Super Bowl is a

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big deal for the first time.

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And I have a strong feeling this is going to be one of the years where it's

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going to be well worth it for all of our listeners to be paying attention to the Super Bowl.

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I think there's going to be a lot of relevant content.

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That is super exciting. And this first ad, A, I agree with you.

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It's awesome. I think it's super well done.

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There's an interesting thing, conventional wisdom at these top platforms on

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this, like super expensive advertising platforms, it generally isn't advisable to go negative.

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Like the general school of thought is you don't call out competitors and you

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don't focus on competitors' disadvantages.

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And there's a fair amount of history behind those kind of ads underperforming.

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And so it's like, obviously, Anthropic is a first time advertiser.

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They put together like, what I think is a really awesome negative ad.

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And we've already seen evidence that it got, it's already landed,

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it's already gone under ChatGPT's skin.

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So they're living rent free inside Sam Altman's head right now.

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So that's going to be super interesting. But I'm also going to be interested

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to see all these other guys with these crazy evaluations, what they do at the Super Bowl.

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And, you know, what and if will we see from Amazon and what and if will we see from Microsoft?

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And, you know, it's going to be fun to watch.

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How about have you gotten caught up in the Claude bot, Molten bot,

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Open bot crazy, where you can have a Mac mini that basically sits there and

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you text it and it does your job for you. You kick back on a beach.

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Yes. I feel like that's a bigger deal for people that had harder jobs than me.

00:09:02.970 --> 00:09:05.810
Like technology has been able to do my job better than me for a long time.

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So it's, it's slightly less of a big deal, but yeah, I'm pretty,

00:09:10.510 --> 00:09:14.190
I mean, bigger picture, maybe we'll talk about this, but like it's all just

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evolving so fast. the pace of change.

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Like I remember when like we were all chat GBT all the time and it seemed like

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everyone else was behind.

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And then like, like Google moved up the, to everyone.

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And now like, you know, everyone in my circles is, is mostly talking about Anthropic this week.

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And so like, if anything, I feel like I'm behind in, I'm trying to dog food

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all these things, but there's like so many tools evolving so fast,

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it's hard to use them all simultaneously. So I feel like I need to take some

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more quality time with Anthropic.

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Are you, have you, have you been using the agents a lot? Are you?

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I have. This one's pretty neat. It's this one guy open sourced it and it has no rails.

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So it's a little scary, but there's ways to put it in kind of a contained environment.

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The breakthrough is you can text with it and it's super multimodal.

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So you could have it call you. You could, you know,

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It basically is unbound because a guy, just a random dude, just open sourced

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it and put it out there to the world. So it doesn't have any of the normal constraints.

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So it is kind of interesting to see what does that look like and what all can it do.

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And it's kind of scary. There's a lot of agentic shopping things.

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People are using it to book trips and do all kinds of complicated stuff.

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I'm going to eventually do a blog post on it. But yeah, it's pretty.

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This is definitely the year of agentic generally, like these agents doing things.

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And this is where they're having a lot of breakthroughs in the coding systems. it's

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it's you know you're going to hear things like swarms of agents and

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it adds an element of parallelism to

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this where once you get to a task where

00:10:39.580 --> 00:10:42.640
you're like well i could do this you know over

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80 different i know you do a lot of data manipulation

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well you could go and say well spin up an agent for every one of the last quarters

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of this data i want to look at and have them do it in parallel and then bring

00:10:53.200 --> 00:10:56.660
it back to data and fold it back together so they can do some really interesting

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things now and they've kind of cracked they're getting close cracking the orchestration

00:11:01.540 --> 00:11:03.660
on the front and back end of that so it's it's,

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It's going to be the next kind of leg up in effectiveness of these things.

00:11:08.540 --> 00:11:11.940
Yeah. I don't know about you. Like, it feels like the theme in my life,

00:11:12.020 --> 00:11:16.380
like they keep improving and then they talk about all these cool use cases they do now.

00:11:16.540 --> 00:11:20.140
And it's like the examples of the things that the robots are taking over from

00:11:20.140 --> 00:11:22.480
the human are all the fun things that I enjoy doing.

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And it still seems like the case that the robots aren't perfect at doing all

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the stuff I really don't want to do. So, like, I have a test suite for these

00:11:31.160 --> 00:11:37.780
do-it-for-me agents, and it's canceling my Comcast account and switching my cell phone providers.

00:11:40.060 --> 00:11:42.720
You know what I mean? It's those calls you dread. It's like,

00:11:42.840 --> 00:11:46.340
but I will tell you, the one that they seem to have won is, like,

00:11:47.300 --> 00:11:49.520
providing tech support for my mother-in-law on Thanksgiving.

00:11:50.340 --> 00:11:50.780
Good.

00:11:51.080 --> 00:11:53.000
And so, those are cool. You are right.

00:11:53.160 --> 00:11:53.620
Versus you.

00:11:53.980 --> 00:11:58.680
Yeah. No, exactly. And oh, my God. And for my 10-year-old, like legitimately,

00:11:58.860 --> 00:12:02.960
there are all these, you know, parental permissions.

00:12:03.020 --> 00:12:07.940
How can my son, you know, do this with his friends in Fortnite if I don't want

00:12:07.940 --> 00:12:12.800
to let him do this kind of thing that are way harder to figure out in the world than they should be?

00:12:13.620 --> 00:12:16.220
And, you know, typically are things that I could figure out,

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but take me 30 or 40 minutes of research to do that now I'm getting...

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Perfect guided responses from the bots instantly.

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So I do feel like there are these use cases where it's getting much, much better, quicker.

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You hit one that's a sore spot for me is I do have to do a bunch of data extraction

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and manipulation every month.

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And February 10th, we're recording this on the 6th, the 10th,

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we get December data from the US Department of Commerce.

00:12:46.540 --> 00:12:49.380
So that's a, i literally like block a day off because

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i'll have all of 2025 data and there are all these interesting questions i have

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but there's a lot of grunt work to get to where i want to be with that and i

00:12:58.820 --> 00:13:04.480
keep testing all of the latest bots and they're they're they're they get closer

00:13:04.480 --> 00:13:07.000
and closer but they're still not reliable so so.

00:13:07.000 --> 00:13:09.860
I know it's a matter of time yeah i have the unlock for

00:13:09.860 --> 00:13:12.760
you and listeners um yeah hit me in in the

00:13:12.760 --> 00:13:16.020
anthropic ecosystem under the clod label they

00:13:16.020 --> 00:13:19.120
now have a excel and they just came out yesterday with

00:13:19.120 --> 00:13:22.260
a powerpoint add-on the excel add-on

00:13:22.260 --> 00:13:24.960
is so good i i got

00:13:24.960 --> 00:13:28.460
an email from anthropic and i was like oh no i i've used

00:13:28.460 --> 00:13:31.700
all my tokens or something they're like congratulations you're one

00:13:31.700 --> 00:13:34.600
of the top users of clod with excel we'd like to invite

00:13:34.600 --> 00:13:38.360
you to our customer something something feedback board

00:13:38.360 --> 00:13:44.300
so i've been just chewing that up because i i love modeling and stuff i hate

00:13:44.300 --> 00:13:48.780
the drudgery of you know like waterfalls cut copy pasting for hours and all

00:13:48.780 --> 00:13:54.140
that kind of stuff so you can just tell it i one shot at a whole new financial

00:13:54.140 --> 00:13:56.600
model for uh my new company and it,

00:13:57.150 --> 00:14:01.830
It was like when ChannelVisor was at a 50 million kind of run rate type model,

00:14:01.990 --> 00:14:04.070
it just like one shot at that.

00:14:04.310 --> 00:14:07.230
And there was no errors. There's like a couple of formatting things that,

00:14:07.230 --> 00:14:10.470
you know, like percentages were not in percent.

00:14:10.810 --> 00:14:17.130
But it was just amazing. So I think you'll find it to be, it will be the one to unlock for you.

00:14:17.310 --> 00:14:21.310
I agree. And I have played with that. And fun fact, everybody's pretty excited

00:14:21.310 --> 00:14:26.990
about the Excel integration. And what's interesting is, of course, Microsoft owns Excel.

00:14:27.150 --> 00:14:31.430
And has deep integration with Copilot, but the Anthropic integration with Excel

00:14:31.430 --> 00:14:33.370
is much better than the Copilot integration.

00:14:33.590 --> 00:14:36.630
Yeah, Copilot's terrible in PowerPoint and Excel.

00:14:36.790 --> 00:14:39.970
Yeah, I would argue it's making better progress in other places,

00:14:40.130 --> 00:14:43.710
but shockingly, not that strong in their suite.

00:14:44.170 --> 00:14:48.870
So I have a very complicated spreadsheet with a lot of this data in it that

00:14:48.870 --> 00:14:53.310
is all, because I built it improperly in the beginning, year-specific.

00:14:53.630 --> 00:14:57.790
So you know what I mean? It's got a five-year history in all these tables,

00:14:57.810 --> 00:15:02.950
but when we roll over to a new year, there's a bunch of work I have to do across

00:15:02.950 --> 00:15:05.350
40 different spreadsheets.

00:15:06.330 --> 00:15:10.490
That's usually a day of my life that I dread. I've already done a test,

00:15:10.530 --> 00:15:11.990
and it already seems like Anthropic

00:15:11.990 --> 00:15:17.670
is going to easily adapt my whole workbook to the next year's data.

00:15:18.230 --> 00:15:24.750
That's a huge win. And what's less awesome is like, I try to track the 50 public

00:15:24.750 --> 00:15:33.170
retailers and their quarterly earnings growth, and they don't all report that uniformly.

00:15:33.170 --> 00:15:36.450
So there's a lot of logic behind the scenes about how to report all that.

00:15:36.610 --> 00:15:41.850
And let me just say, like, the problem now is you assign any of these agents

00:15:41.850 --> 00:15:48.110
to go do that research for you, and it looks super credible, and it's 85% correct.

00:15:48.110 --> 00:15:55.410
But there's still 15% of mistakes that are harder to find, but significant.

00:15:55.810 --> 00:15:56.310
Yeah.

00:15:57.290 --> 00:15:58.450
Yeah, they'll get there.

00:15:58.650 --> 00:16:01.570
Yeah, yeah, yeah. I'm sure they will. I make mistakes too, by the way,

00:16:01.690 --> 00:16:03.230
so it doesn't have to be perfect.

00:16:03.850 --> 00:16:07.330
It just has to be better than me. I think Claude would, you could say start

00:16:07.330 --> 00:16:10.510
a new year and use the last year. I think it'll one shot it for you.

00:16:10.710 --> 00:16:11.790
Yeah, I'm going to try for sure.

00:16:11.910 --> 00:16:14.270
That's my prediction. Let us know. Next pod, you'll let us know how it goes.

00:16:14.550 --> 00:16:14.790
Okay.

00:16:14.910 --> 00:16:18.070
And I can't recommend it strong enough to everyone listening. It's really good.

00:16:18.150 --> 00:16:22.630
I just got the PowerPoint one last night and I had to do this frequently asked

00:16:22.630 --> 00:16:28.350
question presentation for potential investors and it created 38 slides for me and it was perfect.

00:16:28.690 --> 00:16:32.870
That was great. I was like, oh my God. My life is so changed right now.

00:16:32.990 --> 00:16:36.590
This is classic Jason and Scott show material. We're doing the Amazon earnings

00:16:36.590 --> 00:16:39.690
podcast and we're 20 minutes in. We haven't mentioned Amazon.

00:16:39.690 --> 00:16:43.090
We're going to keep it short this time. We're going to keep it under three hours.

00:16:43.490 --> 00:16:45.550
But that's a good setup, Jason. Yeah.

00:16:46.090 --> 00:16:51.370
We're here to talk about Amazon earnings, but I also think it's important to

00:16:51.370 --> 00:16:55.390
take a step back and kind of look at what is going on and you kind of think

00:16:55.390 --> 00:16:57.550
about our perspective of are we in a bubble?

00:16:58.230 --> 00:17:02.530
Now, the main reason people are asking that is there's all these deals of,

00:17:02.530 --> 00:17:05.870
you know, NVIDIA investing and then getting money back and all that.

00:17:05.990 --> 00:17:11.190
That's the one that people focus on. That's not really our wagon, our bailiwick. So,

00:17:12.170 --> 00:17:15.910
What we're going to do is really look at these through the e-commerce and retail

00:17:15.910 --> 00:17:21.110
lens, first of all, but also try to frame this in what the companies are saying.

00:17:21.350 --> 00:17:24.290
We get all the earnings calls and all the Wall Street reports.

00:17:24.510 --> 00:17:30.530
So we've picked through all that and we found some tidbits that I think help paint the picture.

00:17:31.010 --> 00:17:33.410
And I like to go through this, long-time listeners will know,

00:17:33.490 --> 00:17:35.990
I like to go through it in kind of a chronological order.

00:17:36.250 --> 00:17:40.890
The setup is usually that Amazon is the last one to report, and that's how it played out this time.

00:17:41.070 --> 00:17:44.790
So first we had Microsoft, and they came out January 27th.

00:17:45.370 --> 00:17:49.110
And the part that's relevant to our discussion is the cloud computing,

00:17:49.270 --> 00:17:50.850
which at Microsoft is called Azure.

00:17:51.190 --> 00:17:57.470
That grew 66% year-over-year, which is pretty material acceleration, to $37.5 billion.

00:17:58.050 --> 00:18:00.730
Now Azure on its own they've only been breaking it

00:18:00.730 --> 00:18:04.290
out for a while for a long time they just called this all cloud they

00:18:04.290 --> 00:18:07.010
included Microsoft 365 so for the first

00:18:07.010 --> 00:18:10.370
time I think this is the third quarter maybe

00:18:10.370 --> 00:18:13.190
this is the fourth quarter I can't remember when they started breaking out but it hasn't

00:18:13.190 --> 00:18:15.850
been long but that's but that's pretty

00:18:15.850 --> 00:18:18.910
good but here's the shocking thing it missed Wall Street's

00:18:18.910 --> 00:18:21.750
whisper numbers we're at that point now where we have

00:18:21.750 --> 00:18:24.850
you know the the low and high estimates

00:18:24.850 --> 00:18:27.690
and if you beat the high or sometimes you

00:18:27.690 --> 00:18:30.350
beat the midpoint everyone's happy now you've got to beat the

00:18:30.350 --> 00:18:33.250
high and hit some kind of unspoken whisper number so that's

00:18:33.250 --> 00:18:38.310
kind of where we are on expectations there the the thing to understand and we'll

00:18:38.310 --> 00:18:42.410
recap this at the end but each one of these companies has started announcing

00:18:42.410 --> 00:18:46.190
a backlog because they're trying to get wall street to understand hey the reason

00:18:46.190 --> 00:18:51.630
we're doing this is we do not have enough capacity and this is what we're is backlogged right now.

00:18:51.890 --> 00:18:56.630
We could recognize this revenue if we had enough servers.

00:18:57.410 --> 00:19:02.290
And Microsoft's backlog is $625 billion. So that's crazy.

00:19:02.630 --> 00:19:09.250
And that has grown 100% year over year. So December quarter of...

00:19:10.050 --> 00:19:13.670
And they have their quarters are off by one. So I won't. Calendar December quarter

00:19:13.670 --> 00:19:17.110
was 298 last year. And then this year it's 625.

00:19:17.390 --> 00:19:21.950
So yeah, more than 100% growth. A couple other things I thought were interesting in there.

00:19:22.110 --> 00:19:27.210
They have 250 customers that are north of a 1 trillion token a year pace.

00:19:27.410 --> 00:19:31.490
When you're using AI, the kind of currency on AI as tokens.

00:19:31.870 --> 00:19:36.370
And that's the one currency. The currency underneath that is basically power.

00:19:36.370 --> 00:19:38.090
So we're at this point now where

00:19:38.090 --> 00:19:41.850
these build outs that were running into physical constraints with the.

00:19:43.420 --> 00:19:48.180
Power system, the ability to bring enough, get enough land and concrete and

00:19:48.180 --> 00:19:51.100
all the things. They added a one gigawatt of capacity.

00:19:52.000 --> 00:19:56.820
Satya Nadella said, agents are the new apps. And then they announced some CapEx

00:19:56.820 --> 00:19:57.640
that we'll go into in a minute.

00:19:58.120 --> 00:20:02.460
Then the day, next day, and the stock was off pretty substantially at Microsoft.

00:20:02.460 --> 00:20:05.240
It was off as much as 10%. I think it's bounced back a little bit.

00:20:05.440 --> 00:20:09.820
So Wall Street's in this thing where last year they were patient.

00:20:09.920 --> 00:20:15.540
They said, okay, you guys are investing against this and we want to see return.

00:20:15.960 --> 00:20:19.360
And this year, everyone's saying, hey, I know you're nervous,

00:20:19.540 --> 00:20:23.240
but we're going to triple down. How do you feel about that? Wall Street said, not good.

00:20:23.500 --> 00:20:28.220
So the stock market has had, on top of that, all these new anthropic tools have

00:20:28.220 --> 00:20:31.960
got Wall Street freaked out that software companies are going to go out of business.

00:20:32.200 --> 00:20:37.300
So it's been a really rough, as we're recording this, basically 10 trading days

00:20:37.300 --> 00:20:39.260
on Wall Street because of all

00:20:39.260 --> 00:20:44.400
the AI's disruption, which was the theme of your NRF keynote, I will add.

00:20:45.280 --> 00:20:51.540
So then the next day, Meta announced the artist formerly known as Facebook and

00:20:51.540 --> 00:20:56.220
their fourth quarter advertising revenue just absolutely crushed it at 58 billion.

00:20:56.560 --> 00:20:58.080
That was a material acceleration.

00:20:58.540 --> 00:21:04.180
And the reason they had such a big acceleration is they're using AI internally

00:21:04.180 --> 00:21:09.120
and a lot of other, they have this other thing that's not really Gen AI, but it's more of a.

00:21:10.200 --> 00:21:14.500
Some kind of machine learning algorithm it has a name you may know it may have

00:21:14.500 --> 00:21:15.720
Max in its name I can't remember,

00:21:16.620 --> 00:21:22.360
But they specifically called out a couple reasons that their ad business is accelerating.

00:21:22.580 --> 00:21:26.600
They have this AI powered creative tool. So it will create the,

00:21:26.840 --> 00:21:29.960
you know, for small businesses that don't have a fancy ad agency,

00:21:30.280 --> 00:21:34.460
like let's say Publicis, you know, they have a little tool that will create their ads.

00:21:35.400 --> 00:21:39.820
That's just the ads from that reached a $10 billion contribution on revenue.

00:21:39.820 --> 00:21:43.960
And then they also have a new way of measuring ads that are really unlocking

00:21:43.960 --> 00:21:45.420
things for advertisers.

00:21:46.100 --> 00:21:52.060
And that's driven by AI that increased conversions 24%. So I think it's when

00:21:52.060 --> 00:21:55.800
I when I parse the language there, I think they're getting much better at targeting with AI.

00:21:56.000 --> 00:21:58.520
I think AI is able to do much better at targeting.

00:21:59.880 --> 00:22:02.840
And then they basically said, hey, here's here's what's going on.

00:22:02.960 --> 00:22:06.680
We think the future we're going to we're going to really invest heavily in AI

00:22:06.680 --> 00:22:09.360
and we use all this money we make from ads to fund it.

00:22:09.820 --> 00:22:13.760
And AI is going to be the big growth driver after ads.

00:22:14.740 --> 00:22:19.140
Famously, so they bet on this open source system called Llama that they built,

00:22:19.380 --> 00:22:21.520
an open source model. And it kind of ran out of steam.

00:22:21.740 --> 00:22:24.860
So famously, Mark Zuckerberg opened up his wallet and has been hiring people

00:22:24.860 --> 00:22:30.560
for north of, you know, $100 million kind of salaries. And some rumored as high

00:22:30.560 --> 00:22:32.980
as a billion would call it spending the Zuck bucks.

00:22:33.240 --> 00:22:38.680
And he has put together kind of a Justice League of America type team of AI

00:22:38.680 --> 00:22:40.820
superstars. And they're working on a new model.

00:22:41.040 --> 00:22:44.680
This week, it came out in an article in the information that that is codenamed Avocado.

00:22:45.360 --> 00:22:51.120
And the other rumor is that they're very excited about its initial results from pre-training.

00:22:51.260 --> 00:22:54.400
So we could have Meta kind of come back into the game here.

00:22:55.100 --> 00:23:00.280
The thing that got me so excited is during the call, he basically said they're

00:23:00.280 --> 00:23:02.540
going to come, they're going to jump into a jump to commerce,

00:23:02.780 --> 00:23:06.740
which is really fascinating because you and I know they've gotten out of,

00:23:06.840 --> 00:23:09.120
they had all this commerce stuff and they've gotten totally out of it.

00:23:09.260 --> 00:23:12.740
So to see them kind of waking up and saying, wait a minute, we need to get back

00:23:12.740 --> 00:23:14.520
into this game is pretty intense.

00:23:15.230 --> 00:23:20.790
Let me just call out a specific quote. He said, this also has implications for commerce.

00:23:20.950 --> 00:23:24.530
Our ads today help businesses find just the right, very specific people who

00:23:24.530 --> 00:23:25.470
are interested in their products.

00:23:26.190 --> 00:23:29.410
New agentic shopping tools will allow people to find just the right,

00:23:29.570 --> 00:23:32.310
very specific set of products from the businesses in our catalog.

00:23:32.530 --> 00:23:36.930
We're focused on making these experiences work across both our feeds and across business messaging.

00:23:37.090 --> 00:23:42.750
So they're basically saying it's going to be on Insta, Blue Facebook, and in WhatsApp as well.

00:23:43.650 --> 00:23:49.910
Then they proceeded to guide CapEx to 115 to 135, which depending on which part

00:23:49.910 --> 00:23:53.770
of that range you look is as high as a 90% year of your growth rate in capital expenditures.

00:23:54.370 --> 00:23:57.410
And Wall Street hated that. So they were off.

00:23:57.650 --> 00:24:00.910
So despite, you know, beat and raise, beat and raise, beat and raise,

00:24:01.170 --> 00:24:05.250
the fact that they're spending so much on CapEx, Wall Street was like, no bueno.

00:24:06.610 --> 00:24:07.610
Anything to throw into that one?

00:24:07.930 --> 00:24:12.270
Yeah, well, I think we're going to see that that's the reoccurring theme of

00:24:12.270 --> 00:24:15.730
the quarter is great financial performance, but we're going to have to spend

00:24:15.730 --> 00:24:17.130
like a drunken sailor next year.

00:24:17.370 --> 00:24:19.730
And in general, Wall Street's not liking that.

00:24:20.810 --> 00:24:24.250
The meta stuff is super interesting.

00:24:24.910 --> 00:24:31.390
The meta broadly calls all of these AI-enabled functions in the advertising

00:24:31.390 --> 00:24:33.750
platform, they call them Advantage Plus, right?

00:24:33.750 --> 00:24:37.210
So there was an era where you would be a human and you'd say,

00:24:37.450 --> 00:24:41.330
I want to buy this audience on Meta to advertise my product to.

00:24:41.630 --> 00:24:45.810
And increasingly, they've said, oh, instead of you specifying the audience,

00:24:46.130 --> 00:24:49.970
you should let our Advantage Plus robot pick the audience for you.

00:24:50.170 --> 00:24:56.530
And at first, the robots didn't perform very well compared to the best human media buyers.

00:24:56.530 --> 00:25:03.430
But increasingly, the robot is able to find a much better audience that's much

00:25:03.430 --> 00:25:06.230
more economical, more efficient to bid on.

00:25:06.590 --> 00:25:12.450
And so they are making a bunch of progress by saying, hey, just turn your budget over to our black box.

00:25:12.590 --> 00:25:15.590
Trust that it'll make a bunch of good decisions for you and get you good ad

00:25:15.590 --> 00:25:17.770
results. And it legitimately is.

00:25:17.930 --> 00:25:21.370
It's scary because you don't know exactly what it's going to do.

00:25:22.110 --> 00:25:27.510
But it's really helping their ads outperform and grow the ads business.

00:25:27.730 --> 00:25:30.630
And you hit one interesting thing. Everyone wants to imagine that all these

00:25:30.630 --> 00:25:35.970
ads on Meta are coming from huge CPGs and huge advertisers with Super Bowl ads.

00:25:36.110 --> 00:25:41.170
It actually mostly isn't. It actually is mostly small businesses and direct-to-consumer

00:25:41.170 --> 00:25:47.430
businesses from China and folks that do have a lot less resources to be really

00:25:47.430 --> 00:25:50.330
sophisticated at managing these advertising campaigns.

00:25:50.330 --> 00:25:55.290
And so the fact that they have tools that are accessible and performant for

00:25:55.290 --> 00:25:58.310
these small businesses has really been an unlock for them.

00:25:58.450 --> 00:26:03.270
So that's, I think, what's going on at Meta. The commerce thing is interesting.

00:26:03.530 --> 00:26:06.070
I think there's a little bit of room for semantics there. I think,

00:26:06.110 --> 00:26:09.810
you know, Meta has a product they call Advantage Plus Shopping,

00:26:09.970 --> 00:26:16.290
which, you know, is all of the buy something called the action focused ads.

00:26:16.290 --> 00:26:20.270
And so if Zuckerberg's talking about that as agentic commerce,

00:26:20.410 --> 00:26:23.210
that's something different than what I think you and I are interested in,

00:26:23.330 --> 00:26:28.150
which is like, does he actually get back into converting his product feed into

00:26:28.150 --> 00:26:32.670
transactions on his platform and who would be the seller of record and all these

00:26:32.670 --> 00:26:34.050
interesting questions that would come up there.

00:26:34.190 --> 00:26:36.890
So we'll keep watching that. There was one other tidbit.

00:26:37.800 --> 00:26:41.880
He, at one point during, during the earnings call, they were talking about the,

00:26:41.880 --> 00:26:44.900
the hardware products and the AI glasses.

00:26:45.700 --> 00:26:51.440
And he said, like, very matter of factly, I can't imagine a future when we're

00:26:51.440 --> 00:26:54.920
not all wearing agents on our face.

00:26:55.340 --> 00:26:57.920
Like that. It just seems so obvious to me that we're all, and,

00:26:58.040 --> 00:27:01.520
you know, we're, we're having a big dispute right now about where the glass

00:27:01.520 --> 00:27:05.460
is going to be for, for these agents. Is it, is it the vertical agents that

00:27:05.460 --> 00:27:07.860
run on, on traditional retailers websites?

00:27:07.980 --> 00:27:10.960
Is it the horizontal agents that have their own websites and apps?

00:27:11.060 --> 00:27:12.960
Is it the browsers? Is it the OS?

00:27:13.580 --> 00:27:18.000
And Mark is like, like I'm a hundred percent convinced we're all going to be

00:27:18.000 --> 00:27:22.280
wearing an agent, which is to me totally viable and pretty interesting.

00:27:23.040 --> 00:27:26.960
Yeah. Yeah. We'll see so far. I haven't met an agent I want to wear on my face,

00:27:27.040 --> 00:27:29.840
but maybe at some point we'll see. Yeah.

00:27:29.940 --> 00:27:32.860
Agreed. But I, it does seem like it's coming one way or another.

00:27:32.860 --> 00:27:35.400
We'll see what what Sir Ives comes up with.

00:27:35.740 --> 00:27:39.860
Yeah, the Ray-Ban things are good, but they feel like they're a couple beats

00:27:39.860 --> 00:27:42.140
behind at this point. It's everything's going so fast.

00:27:43.720 --> 00:27:47.800
Then we had February 4th, which was Google, also known as Alphabet.

00:27:48.360 --> 00:27:52.800
So just a couple tidbits from this one. They said Gemini models now process

00:27:52.800 --> 00:27:57.800
over 10 billion tokens a minute through API, up from 7 billion the prior quarter.

00:27:57.940 --> 00:28:00.860
They love throwing around these crazy big numbers.

00:28:01.960 --> 00:28:05.980
Side note, isn't it fun that the currency that was most important to us as 10-year-olds

00:28:05.980 --> 00:28:08.220
in the arcade is still the most important currency?

00:28:08.220 --> 00:28:11.300
It is. Yeah, we've been on this token thing for quite a while.

00:28:11.580 --> 00:28:11.760
Yeah.

00:28:12.420 --> 00:28:14.000
The Chuck E. Cheese ones were the best.

00:28:14.500 --> 00:28:14.820
Absolutely.

00:28:16.920 --> 00:28:21.480
Gemini 3 Pro has processed three times more tokens than the previous Gemini.

00:28:21.940 --> 00:28:25.860
They had 350 customers that processed more than 100 billion tokens.

00:28:26.060 --> 00:28:29.360
So everyone's trying to find these kind of standout metrics.

00:28:29.640 --> 00:28:31.600
And they change them every time, which is annoying.

00:28:32.020 --> 00:28:36.840
For a long time, Google put out this one that was tokens in the quarter,

00:28:36.880 --> 00:28:39.980
I think it was. And then it slowed down a little bit. So now they've stopped using it.

00:28:41.220 --> 00:28:46.080
There was another one i don't think i captured it here they did announce that

00:28:46.080 --> 00:28:51.780
gemini has crossed 750 million active users i forget if that was i think that

00:28:51.780 --> 00:28:53.540
was monthly i don't think it was weekly,

00:28:54.300 --> 00:28:58.920
so just a lot of growth on on the consumer facing side they also spent a lot

00:28:58.920 --> 00:29:03.140
of time talking about you know there's all these people that and i was in this

00:29:03.140 --> 00:29:07.020
camp i will i'll admit i was wrong on this prediction that it just seemed intuitive

00:29:07.020 --> 00:29:10.920
to me they wouldn't be able to figure out how to monetize an answer engine as well as a search engine.

00:29:13.140 --> 00:29:18.560
For the last year, they have actually gotten to the point where the monetization is better.

00:29:18.820 --> 00:29:21.520
So they've actually, it was a little worse and they were actually kind of clear

00:29:21.520 --> 00:29:23.880
on that. And now they say it's materially better.

00:29:24.180 --> 00:29:28.400
They were almost like, it's hard to get this across here, but they were almost

00:29:28.400 --> 00:29:30.760
like a little giddy about it. It seemed like they were getting excited.

00:29:30.880 --> 00:29:32.320
And I've always felt like there

00:29:32.320 --> 00:29:37.120
will be a moment in time where AI mode becomes, you know, the default.

00:29:37.460 --> 00:29:40.860
And I think this will happen to Rufus too. At some point, these companies are

00:29:40.860 --> 00:29:44.600
going to switch the old mode, which is the core search.

00:29:44.840 --> 00:29:47.600
And then you get a click on something to get the answer mode.

00:29:47.740 --> 00:29:50.500
That's going to flip. And I think Google is going to be first.

00:29:50.760 --> 00:29:57.060
And it'll be interesting because a big moment in time to kind of think about is holiday sales 2026.

00:29:57.900 --> 00:30:01.240
Will we see one of these big companies, either Amazon or Google,

00:30:01.360 --> 00:30:06.380
make a big move before holiday? to if because the logic is if the economics

00:30:06.380 --> 00:30:07.600
are actually getting better inside

00:30:07.600 --> 00:30:11.140
of that ai thing then why have the old thing you know right so it will.

00:30:11.140 --> 00:30:13.540
Yeah that'll be the moment that.

00:30:13.540 --> 00:30:14.560
They're really serious about it.

00:30:14.560 --> 00:30:18.740
Yeah i actually think it's a pretty safe bet by holiday 2026 because it it when

00:30:18.740 --> 00:30:22.460
we first started talking about this ai overviews were showing up in three percent

00:30:22.460 --> 00:30:28.120
of google queries um and by some counts it's it's approaching 50 now so it's

00:30:28.120 --> 00:30:29.220
like we talked about this,

00:30:29.320 --> 00:30:33.200
but essentially that, you know, they really constrained it when they didn't,

00:30:33.240 --> 00:30:36.800
when they had the revenue to protect in their legacy business that they hadn't

00:30:36.800 --> 00:30:39.180
figured out how to replace in the AI overviews.

00:30:39.240 --> 00:30:43.300
But now that it seems like they're, at least for some kinds of queries,

00:30:43.500 --> 00:30:47.040
confident in how they're going to monetize the queries, it seems like they're

00:30:47.040 --> 00:30:48.800
turning that dial pretty darn fast.

00:30:49.620 --> 00:30:54.860
Yeah, it's crazy. So they had all these amazing vanity stats and how awesome

00:30:54.860 --> 00:30:59.240
that's going, also their cost to serve everything is going down because they have their own TPUs.

00:30:59.300 --> 00:31:02.920
They always like to kind of throw it in NVIDIA's face that they're not on their hardware.

00:31:03.500 --> 00:31:06.440
And then they said, here's our CapEx guidance.

00:31:06.700 --> 00:31:10.480
We are going to double our year over your CapEx. And Wall Street took all that

00:31:10.480 --> 00:31:14.200
interesting, exciting news and basically sent the stock down,

00:31:15.190 --> 00:31:19.410
three to five percent yeah so i'm sure that was right it's almost like investors.

00:31:19.410 --> 00:31:22.570
Like share buybacks better than they like capex investments.

00:31:22.570 --> 00:31:27.270
They do yes they are very short-term thinkers it turns out some of them so we'll

00:31:27.270 --> 00:31:31.370
see and then there's a couple they did talk a little bit about agentic commerce

00:31:31.370 --> 00:31:34.970
and i don't know if you get into this but i get i get in conversations.

00:31:35.830 --> 00:31:40.370
The naysayers have a more nuanced attack on agentic commerce and so it used

00:31:40.370 --> 00:31:41.810
to be definitions And they're still out there.

00:31:42.050 --> 00:31:45.310
And now I'm getting people that say, how serious is Facebook,

00:31:45.510 --> 00:31:48.050
Google, and all these people about this? Like, is this, are they going to just

00:31:48.050 --> 00:31:49.830
rug pull us on this or is this really serious?

00:31:50.030 --> 00:31:54.890
So, you know, so basically in the fourth quarter earnings transcript,

00:31:55.070 --> 00:31:56.130
here's three little snippets.

00:31:56.130 --> 00:32:00.430
So the chief business officer said, as Sundar mentioned in his candid remarks,

00:32:00.630 --> 00:32:03.330
we're building an era of agentic commerce and working with our partners to introduce

00:32:03.330 --> 00:32:06.910
the universal commerce protocol in our consumer products and across the entire web.

00:32:07.410 --> 00:32:12.630
What they mean there is they also did a they're adding Gemini to Chrome and

00:32:12.630 --> 00:32:17.410
it will go buy things for you and check out through UCP. So UCP is actually kind of.

00:32:18.230 --> 00:32:23.070
You know, breaking out of the site experience and becoming untethered.

00:32:23.210 --> 00:32:26.770
So none of this is live. I'm having a little hard time imagining how well that's

00:32:26.770 --> 00:32:27.770
going to work until I see it.

00:32:27.870 --> 00:32:34.710
But there, my overall overarching point here is Google is really serious about this stuff.

00:32:34.830 --> 00:32:39.770
This is not a 20% time thing from one developer. This is from the CEO down.

00:32:40.410 --> 00:32:43.610
We've received tremendous feedback from the industry. Soon people can use a

00:32:43.610 --> 00:32:49.010
new checkout experience to buy directly in AI mode in Gemini. for select merchants.

00:32:49.290 --> 00:32:54.150
So this is not launched yet, but they said soon. So I don't think in fourth

00:32:54.150 --> 00:32:59.150
quarter earnings call on February 4th or whatever it was, you say this if you're

00:32:59.150 --> 00:33:00.450
not going to have it out by the next one.

00:33:00.610 --> 00:33:04.690
So my prediction is, I also predict that on the Facebook thing.

00:33:04.810 --> 00:33:07.670
I think they're going to do some kind of agentic thing between next earnings

00:33:07.670 --> 00:33:12.190
call and I think UCP will launch before then.

00:33:12.530 --> 00:33:16.370
I have trouble with UCP because I want to say UPC because I say it so many times.

00:33:17.830 --> 00:33:20.770
And then sundar said in our areas like he was

00:33:20.770 --> 00:33:23.470
responding to a question from our friend at morgan

00:33:23.470 --> 00:33:27.990
stanley uh brian noack so brian asked about agentic commerce and sundar said

00:33:27.990 --> 00:33:31.230
in areas like commerce i think we spent the year working with the ecosystem

00:33:31.230 --> 00:33:35.150
to develop the underlying protocol that's going to be needed for this new agentic

00:33:35.150 --> 00:33:39.590
world the launch of universal commerce protocol at nrf in january with a bunch

00:33:39.590 --> 00:33:43.010
of partners founding partners i think has been super well received.

00:33:43.230 --> 00:33:48.710
I'm excited now that we have laid the foundation of operability in which agentic commerce can work.

00:33:49.400 --> 00:33:53.240
And then finally, another person. So this is Michael at Moffat Nathanson.

00:33:53.400 --> 00:33:56.940
I think I've met him before, but I haven't seen him on the calls before,

00:33:57.040 --> 00:33:57.560
so that was interesting.

00:33:58.220 --> 00:34:01.720
He also asked about this. So Wall Street is really tuned in on this.

00:34:02.020 --> 00:34:06.280
So this is coming from the tippy top down. And he asked a question and Sundar

00:34:06.280 --> 00:34:11.020
answered, part of what's been good in designing the Universal Protocol is it

00:34:11.020 --> 00:34:13.100
makes it much easier for users to complete their transactions.

00:34:13.100 --> 00:34:16.180
But at the same time, it allows merchants to showcase the range of their offerings.

00:34:16.360 --> 00:34:19.320
If they want to make promotions, et cetera, all that is built into

00:34:19.320 --> 00:34:23.100
the protocol so they do as a reminder they do have an ad unit in there it's

00:34:23.100 --> 00:34:27.340
called the deal i think it's called the deal ad digital commerce deal ad unit

00:34:27.340 --> 00:34:31.360
so you can kind of say if someone gets down to your product you can offer a

00:34:31.360 --> 00:34:36.740
real-time deal in there anything else stand out to you in the google announcement yeah.

00:34:36.740 --> 00:34:41.040
I mean just kind of echoing your point a in my mind google's version of the

00:34:41.040 --> 00:34:46.960
protocol ucp is more ambitious than chad gbt's like chad gbt is mostly targeted

00:34:46.960 --> 00:34:49.480
at ChatGPT specific use case,

00:34:49.640 --> 00:34:56.500
but the Google version to me is much more general and enables a lot of different use cases.

00:34:56.680 --> 00:35:00.260
And what I'm excited about is I feel like kind of the same phenomenon you guys

00:35:00.260 --> 00:35:04.240
had at Channel Advisor back in the day, like when eBay was trying to get people

00:35:04.240 --> 00:35:07.020
to become merchants, it was a tough sell.

00:35:07.120 --> 00:35:12.440
But after they became eBay merchants, it became super easy for Amazon to convince

00:35:12.440 --> 00:35:14.540
them to also be Amazon merchants.

00:35:14.920 --> 00:35:19.420
And adding that second and third and fourth marketplace became way easier.

00:35:19.680 --> 00:35:24.140
And in that same way, like as we sit here right now recording this podcast,

00:35:24.320 --> 00:35:28.720
there are hundreds of millions of products in ChedGPT's feed.

00:35:28.920 --> 00:35:33.560
And so I expect that we're going to see all those products instantly show up

00:35:33.560 --> 00:35:37.980
in Google's much more ambitious feed very shortly here. And I think that's going

00:35:37.980 --> 00:35:39.720
to be a pretty exciting moment.

00:35:41.590 --> 00:35:45.690
Okay. And with that backdrop, it brings us to...

00:35:46.450 --> 00:35:52.250
Yeah. So Amazon news, I think we're only, what, about three hours into the podcast and we got to Amazon.

00:35:54.410 --> 00:35:57.210
Spoiler alert, as we've already heard from some of these other companies,

00:35:57.350 --> 00:36:02.570
Amazon had their earnings call last night and their stock is down 8% as of the

00:36:02.570 --> 00:36:05.110
moment we started recording here.

00:36:05.110 --> 00:36:09.350
And it's a similar story, a lot of huge traction and success,

00:36:09.550 --> 00:36:14.250
but they also announced that they're going to make some huge CapEx investments

00:36:14.250 --> 00:36:17.210
this year on the order of magnitude of $200 billion.

00:36:18.490 --> 00:36:24.710
And investors did not love that, right? So that was kind of like the takeaway.

00:36:24.950 --> 00:36:28.890
You're a $2.6 trillion company. You're going to invest $200 billion next year.

00:36:29.110 --> 00:36:31.690
And that made investors nervous.

00:36:32.050 --> 00:36:34.450
Scott, what were your big takeaways from the earnings call?

00:36:35.110 --> 00:36:36.310
From Amazon?

00:36:36.830 --> 00:36:36.990
Yeah.

00:36:37.910 --> 00:36:38.950
Yeah, the...

00:36:40.350 --> 00:36:41.630
I've got so many. Let's talk about them.

00:36:42.350 --> 00:36:42.510
Yeah.

00:36:43.810 --> 00:36:44.370
I agree.

00:36:44.430 --> 00:36:48.290
I mean, were you surprised overall that the stock went down or were you?

00:36:48.890 --> 00:36:53.610
Well, I didn't know what the CapEx was when I saw it. I was watching CNBC and

00:36:53.610 --> 00:36:58.210
my buddy Gene Munster came on and he was like, he was almost like babbling incoherently.

00:36:58.370 --> 00:37:01.490
He was so freaked out by the CapEx and I knew something bad had happened.

00:37:01.890 --> 00:37:05.790
I was like, uh-oh. And then like they had the little aftermarket stock thing

00:37:05.790 --> 00:37:09.310
up and it went reek and fell off a cliff immediately. And it was like,

00:37:09.590 --> 00:37:13.170
because the first headlines were like, beats revenue by this much,

00:37:13.350 --> 00:37:16.210
beats EPS, this part of the business is screaming.

00:37:16.550 --> 00:37:19.270
And then it was like CapEx to double.

00:37:19.630 --> 00:37:22.230
And then it was like, pulled the handbrake on the whole thing.

00:37:22.490 --> 00:37:25.890
Yeah, it is interesting, though. And I think we'll talk about this more.

00:37:26.010 --> 00:37:30.150
But like, all of these businesses are so capacity constrained.

00:37:30.690 --> 00:37:34.130
You already mentioned it. Like, they all need more AI chips.

00:37:34.270 --> 00:37:37.870
They all need more power. They all need more cooling for all those chips.

00:37:38.330 --> 00:37:47.170
And those capacity bottlenecks are atoms, not bits, and they're super expensive to buy more, right?

00:37:47.270 --> 00:37:56.810
And so it feels like the way to unlock more sales is going to be even higher levels of spending.

00:37:56.810 --> 00:38:02.210
I listened to a podcast last month that was completely serious and not ironic,

00:38:02.210 --> 00:38:07.090
talking about how the big unlock in our category is going to be when the data

00:38:07.090 --> 00:38:11.790
centers move up into space where the solar power is cheaper and the cooling is much easier.

00:38:12.410 --> 00:38:18.870
Speaking of space, Jassy was almost, the Amazon execs sound a lot like Warren

00:38:18.870 --> 00:38:22.870
Buffett in that they are very cautious about investing this type of money.

00:38:22.870 --> 00:38:27.790
And he was basically saying, we've never, we've been sitting on the sidelines

00:38:27.790 --> 00:38:30.490
on a lot of cash for a long time and we're going to deploy it because we've

00:38:30.490 --> 00:38:34.610
never seen so many high return on investment opportunities in front of us.

00:38:34.850 --> 00:38:39.350
So, so this number, this $200 billion number, which is the biggest of them all.

00:38:40.240 --> 00:38:44.960
It includes all the AI stuff. So it's more data center build out and chips and everything.

00:38:45.480 --> 00:38:49.300
It's also fourth generation of Tranium, which is their chip.

00:38:49.540 --> 00:38:53.960
It's also, they're launching like thousands of low earth orbit.

00:38:54.100 --> 00:38:57.020
They call it Project Leo satellites to compete with Starlink.

00:38:57.280 --> 00:39:00.140
They also are coming out with some kind of a satellite phone thing.

00:39:00.340 --> 00:39:04.300
I'm a little less clear on that one. I thought it was more, I didn't understand

00:39:04.300 --> 00:39:05.780
there was maybe a phone coming out.

00:39:05.960 --> 00:39:06.140
Yeah.

00:39:06.380 --> 00:39:09.400
And then on top of that, they're building a bunch more fulfillment centers because

00:39:09.400 --> 00:39:12.340
as we'll get into the retail part of the business is like

00:39:12.340 --> 00:39:15.260
hitting a capacity thing too so they're getting

00:39:15.260 --> 00:39:17.860
and you know i know this is one

00:39:17.860 --> 00:39:21.140
of your favorite topics but they sound generally surprised about

00:39:21.140 --> 00:39:27.160
essentials so it's a really it's a really disconnected time because i've never

00:39:27.160 --> 00:39:32.120
jassy's like a super kind of straight laced guy and he i've never heard him

00:39:32.120 --> 00:39:35.480
sound excited i wouldn't know if the normal the way the normal person would

00:39:35.480 --> 00:39:38.520
would sound it wasn't excited but he was excited for Jassy.

00:39:38.700 --> 00:39:41.280
It was like almost giddy that they found so much stuff to invest in.

00:39:41.640 --> 00:39:44.560
Also, Wall Street, it took a while for them to figure this out because this

00:39:44.560 --> 00:39:46.140
number was so big and surprised them.

00:39:46.400 --> 00:39:51.640
But basically, this makes their free cash flow go to zero or negative for the

00:39:51.640 --> 00:39:53.520
first time in a very long time.

00:39:53.660 --> 00:39:56.300
Maybe since like 2010 or something.

00:39:56.600 --> 00:39:59.860
No one's been able to kind of put that number out.

00:39:59.940 --> 00:40:04.640
I think people are still looking back to figure out when free cash flow would have been low.

00:40:04.760 --> 00:40:09.260
But it's not because the business is generating more than ever but they're spending

00:40:09.260 --> 00:40:11.520
it immediately on the other hand for all this stuff it's crazy.

00:40:11.520 --> 00:40:16.080
Yeah yeah so let's let's dive into some of the segments and i obviously vote

00:40:16.080 --> 00:40:22.700
we start with the the best and most important segment which is retail yeah uh you.

00:40:22.700 --> 00:40:23.400
Want to take it or should i.

00:40:23.400 --> 00:40:28.720
Yeah yeah i'll i'll do the retail one uh because there it's it's mostly good

00:40:28.720 --> 00:40:33.500
news like a they they generally beat expectations so i think like they were

00:40:33.500 --> 00:40:36.720
plus plus two percent on north american retail,

00:40:36.860 --> 00:40:39.920
they're like plus 7% on international versus expectations.

00:40:40.240 --> 00:40:42.320
I care less about the expectations.

00:40:43.850 --> 00:40:52.730
General, their store segment grew like 11%. They don't disclose like North American

00:40:52.730 --> 00:40:57.990
online and offline retail together, but we all build models based on what they do disclose.

00:40:58.390 --> 00:41:01.110
And I'm waiting for the much smarter people's models to come out.

00:41:01.190 --> 00:41:06.450
But in my model, North American retail for the year grew 9.1%.

00:41:06.450 --> 00:41:11.590
So put that in perspective, that's Amazon, the first or second largest retail

00:41:11.590 --> 00:41:14.550
in the United States growing by 9.1% last year.

00:41:14.850 --> 00:41:19.630
We'll get government data on the rest of the industry next week, but the U.S.

00:41:19.790 --> 00:41:25.150
Is likely retail grew at 3.1%. So Amazon is the first or second biggest player

00:41:25.150 --> 00:41:28.510
out there, and they're growing three times the industry average. So that.

00:41:29.210 --> 00:41:37.170
Is huge. Another super interesting thing is that almost exactly mirrors their growth in units.

00:41:37.330 --> 00:41:40.970
So it seems like most of their growth is coming from selling more stuff,

00:41:40.990 --> 00:41:44.870
which is not how most other retailers are growing right now.

00:41:44.970 --> 00:41:48.190
Most other retailers are growing by selling stuff more expensively.

00:41:48.330 --> 00:41:53.270
And so that to me is a big encouraging sign for Amazon.

00:41:53.610 --> 00:41:57.830
And you hit it like the likely star here.

00:41:58.070 --> 00:42:03.050
They talked very little about growth acceleration in general merchandise or

00:42:03.050 --> 00:42:05.930
electronics or any of their traditionally strong categories.

00:42:06.310 --> 00:42:11.770
The unlock here is what Amazon calls everyday essentials, which is closely related

00:42:11.770 --> 00:42:15.250
to grocery, which Amazon calls fresh and frozen.

00:42:15.830 --> 00:42:19.250
And essentially, you know, during the pandemic, they said, hey,

00:42:19.410 --> 00:42:22.730
you know, we used to ship stuff from anywhere in the US to any customer in the US.

00:42:22.930 --> 00:42:25.830
Now we're going to go to a hub and spoke model with regional distribution.

00:42:26.230 --> 00:42:29.850
And so all the stuff that goes to the Wingo household is going to come from.

00:42:30.890 --> 00:42:34.130
His area of the country, and that's going to be more efficient.

00:42:34.290 --> 00:42:39.170
And that pivot totally worked. And then last year, they said,

00:42:39.270 --> 00:42:40.190
you know what we're going to do?

00:42:40.990 --> 00:42:44.510
Instead of trying to open more grocery stores, we're going to put refrigerators

00:42:44.510 --> 00:42:48.530
in all those fulfillment centers that are now close to the Wingo's household

00:42:48.530 --> 00:42:55.430
and deliver fresh and frozen same day from that local fulfillment center to Scott.

00:42:55.670 --> 00:43:01.230
And so today, there's like 2,300 cities in the United States where they're delivering

00:43:01.230 --> 00:43:08.530
fresh and frozen grocery same day. And that is all of the unlock at Amazon.

00:43:08.690 --> 00:43:15.070
In every one of those 2,300 markets, nine of the 10 fastest turning skews,

00:43:15.590 --> 00:43:21.410
are fresh and frozen. So wherever they offer this capacity, customers are eating it up.

00:43:21.610 --> 00:43:24.770
And to me, this is very reminiscent of history.

00:43:24.950 --> 00:43:27.990
Like there was this huge retailer that invented discount retailing.

00:43:28.130 --> 00:43:29.710
It was wildly successful called Walmart.

00:43:30.010 --> 00:43:33.350
And the founder retired. He got replaced by David Glass.

00:43:33.670 --> 00:43:38.170
And David came in and said, you know, the one category we're not in that's super important is grocery.

00:43:38.370 --> 00:43:42.570
We're going to add grocery to all our stores. And everyone told them he was

00:43:42.570 --> 00:43:46.370
absolutely insane, that grocery was way harder than all the things that Walmart

00:43:46.370 --> 00:43:49.630
was doing and way lower margin, and then it was going to sink the company.

00:43:50.270 --> 00:43:54.450
And today, Walmart's the largest grocer in the world, and grocery is like 60%

00:43:54.450 --> 00:43:57.970
of their business, and it essentially saved the company and helped it continue to grow.

00:43:58.330 --> 00:44:03.270
And that same thing I feel like is happening to Amazon this year,

00:44:03.310 --> 00:44:06.890
that they were a very successful general merchant that secretly wasn't selling

00:44:06.890 --> 00:44:11.370
a lot of grocery other than non-perishables like white paper towels and whatnot.

00:44:11.730 --> 00:44:17.710
And this year, they've unlocked how to become one of the country and potentially

00:44:17.710 --> 00:44:19.930
the world's largest grocers.

00:44:20.330 --> 00:44:23.210
And so, you know, even though they're a very big retail business,

00:44:23.450 --> 00:44:26.930
they're still growing three times faster than the industry average.

00:44:26.930 --> 00:44:28.970
And that's a pretty big deal.

00:44:29.950 --> 00:44:35.550
Two quick questions. So the, if we kind of 11 or 12% is kind of where the Amazon

00:44:35.550 --> 00:44:38.370
online business is growing if we back into it. Yeah.

00:44:38.910 --> 00:44:41.550
And that, you know, I know it hasn't come out and you're excited,

00:44:41.770 --> 00:44:45.750
you're giddy over February 10th or whatever it is, but do you think historically

00:44:45.750 --> 00:44:49.290
that's pretty materially above what the rest of e-commerce is doing? Is that?

00:44:49.450 --> 00:44:54.570
Yeah, that's what I'm saying. So, so discount the 11% is a slightly like more

00:44:54.570 --> 00:45:02.430
complicated number, In the US, call that 11%, 9.1%. It's going to be somewhere between 9.1% and 9.5%.

00:45:02.430 --> 00:45:03.830
So you got to take a national.

00:45:04.110 --> 00:45:10.990
Yeah. So call the US growth rate 9.1%. The government is saying the rest of

00:45:10.990 --> 00:45:14.190
retail is going to be growing at 3.1%, including Amazon.

00:45:14.430 --> 00:45:21.510
So all of retail is growing at 3.1%. So Amazon's growing 3x the total market in the US.

00:45:23.380 --> 00:45:27.560
And then explain, I think I know the answer to this, but I'm curious,

00:45:27.680 --> 00:45:30.800
like, why was the dude that took over for Sam, right?

00:45:30.940 --> 00:45:34.440
Like, why is grocery working for both these companies and everyone thought it wouldn't?

00:45:34.740 --> 00:45:39.360
Yeah, because A, while it's a lower margin, more difficult category because

00:45:39.360 --> 00:45:43.640
it has spoilage and all this extra complication associated with it,

00:45:43.920 --> 00:45:47.000
it's 25% of the consumer's discretionary wallet.

00:45:47.180 --> 00:45:52.300
So it's the biggest category of spending and it's the most frequent category

00:45:52.300 --> 00:45:55.440
of spending. So you might be in market for a new TV every three years,

00:45:55.600 --> 00:45:59.960
you might be in market for new clothes every year, but you're in market for bananas every week.

00:46:00.060 --> 00:46:06.180
And so the way to get customer intimacy, the way to move up the importance in

00:46:06.180 --> 00:46:10.260
the customer's life is to be the provider of all of those groceries.

00:46:10.600 --> 00:46:17.540
And once you have pole position for that, you can win a lot more share of that

00:46:17.540 --> 00:46:22.820
customer. And so today, there's about 220 million households in the United States of America.

00:46:23.380 --> 00:46:29.800
190 million households visit Walmart once a week. And that would not be true were it not for grocery.

00:46:31.270 --> 00:46:34.670
So it's an LTV play and a frequency thing.

00:46:34.870 --> 00:46:38.590
It kind of flips it like now you're coming in every week for groceries,

00:46:38.590 --> 00:46:42.370
you'll pick up a toy or something in the other part of the general merch. Exactly.

00:46:42.530 --> 00:46:48.730
So now the opportunity cost to buy clothes from that grocer as opposed to going

00:46:48.730 --> 00:46:50.450
to a mall is much lower, right?

00:46:50.610 --> 00:46:57.030
The friction to get your Instapot from Walmart is much lower than from Sur La Tabla or wherever.

00:46:57.690 --> 00:46:59.590
Doesn't everyone have four Instapots by now?

00:46:59.590 --> 00:47:02.110
They do, but you need a new one every year. They keep getting better.

00:47:02.330 --> 00:47:04.430
You know what they have in the Instapot now is AI.

00:47:04.950 --> 00:47:05.630
And a microwave.

00:47:06.090 --> 00:47:06.370
Yeah.

00:47:07.150 --> 00:47:07.550
Yeah.

00:47:08.030 --> 00:47:11.250
I always worry about the device where it's like, oh, it does two things.

00:47:11.390 --> 00:47:13.430
And if you push the wrong button, it's going to explode.

00:47:14.110 --> 00:47:15.930
Yeah. Don't do those two things simultaneously.

00:47:16.710 --> 00:47:23.530
Exactly. But yeah. So to me, it's funny, we didn't even really talk about it,

00:47:23.590 --> 00:47:26.770
but Amazon made an announcement earlier this year, we're closing all of our

00:47:26.770 --> 00:47:28.950
physical grocery stores except for Whole Foods.

00:47:29.150 --> 00:47:34.770
So they actually have about 100 Amazon Fresh stores or 60 Amazon Fresh stores.

00:47:34.970 --> 00:47:40.430
And then they have these Amazon Go stores that we've been making fun of for quite a few years now.

00:47:40.810 --> 00:47:45.790
And they're closing all of those. And so there was a narrative from some reporters

00:47:45.790 --> 00:47:49.310
that are like, oh, Amazon can't win grocery, they're getting out of it.

00:47:49.510 --> 00:47:53.850
And they're actually closing those grocery stores because their hypothesis that

00:47:53.850 --> 00:47:59.090
they don't need those stores to become America's food provider,

00:47:59.270 --> 00:48:03.490
or at least compete to be America's food provider, they've proven their hypothesis.

00:48:03.990 --> 00:48:10.410
So that to me is, if I'm a traditional grocer, if I'm Kroger, I'm very worried.

00:48:10.570 --> 00:48:14.470
I think the fact that Amazon said, oh, you know what? We don't have to join Kroger.

00:48:14.590 --> 00:48:19.410
We can beat them with our preferred method is a very scary moment for Kroger.

00:48:21.430 --> 00:48:23.250
Anything else? Should I talk about Marketplace?

00:48:23.990 --> 00:48:25.710
Yeah. Yeah. Does Marketplace still matter?

00:48:26.210 --> 00:48:29.470
They do. In fact, it matters a lot.

00:48:30.770 --> 00:48:36.890
So Marketplaces came in at 62% of total units sold, which is an all-time high

00:48:36.890 --> 00:48:38.030
watermark. Very exciting.

00:48:38.230 --> 00:48:40.970
It's only up one percentage point, but hey, we're going to call it a win.

00:48:42.390 --> 00:48:46.690
So Flywheel Effect for the Marketplace, they launched in 2006,

00:48:46.950 --> 00:48:49.990
like 20 years ago. I think this may be, or was it seven?

00:48:50.610 --> 00:48:53.510
I think we knew about it in a six and they launched a seven. I can't remember.

00:48:53.910 --> 00:49:01.390
It may be the 19th anniversary or the 20th anniversary of the marketplace. And it is still humming.

00:49:01.770 --> 00:49:06.450
The, that famous flywheel drawing is still working.

00:49:06.590 --> 00:49:11.470
The flywheel is still flying and just creeping up to, to another 1% there.

00:49:12.110 --> 00:49:15.310
And then that is good. Should I jump into AWS?

00:49:15.730 --> 00:49:16.110
Yeah, yeah, yeah.

00:49:17.320 --> 00:49:19.600
I wasn't sure if you wanted to say anything more about essentials.

00:49:19.740 --> 00:49:23.060
I know you love essentials and groceries, but I want to give you another bite at that.

00:49:23.100 --> 00:49:27.700
Yeah, no, but again, like if Amazon wins all these essential visits,

00:49:27.980 --> 00:49:30.560
it's an unlock for all the marketplace sellers, right?

00:49:30.620 --> 00:49:34.180
So we talked about like, what else do you bundle into that trip?

00:49:34.440 --> 00:49:35.980
It's all the marketplace items that are.

00:49:35.980 --> 00:49:41.020
You know, much better margin. Interlocking flywheels, all flywheeling together.

00:49:41.620 --> 00:49:42.000
Exactly.

00:49:43.100 --> 00:49:48.120
Mega, meta flywheeling. All right, AWS. So this is the one everyone was watching.

00:49:48.400 --> 00:49:51.020
And this is the only profitable business at Amazon, right?

00:49:52.040 --> 00:49:55.600
Nope. They are all profitable, but people don't really realize that there's

00:49:55.600 --> 00:49:58.780
this many retailers still have it stuck in their head that Amazon wouldn't be

00:49:58.780 --> 00:50:01.060
profitable if it wasn't for that stupid cloud business.

00:50:01.300 --> 00:50:06.020
But that is fake news. So we're actually going to talk about the most profitable

00:50:06.020 --> 00:50:10.480
spoiler alert part of Amazon, which has been AWS has been dethroned.

00:50:10.980 --> 00:50:15.380
But you'll tell us about that. I'll talk about AWS. So everyone was expecting

00:50:15.380 --> 00:50:19.140
an acceleration here, and it slowed down a little bit, and everyone was disappointed.

00:50:19.400 --> 00:50:24.220
So this was even before they revealed the $200 billion bombshell of CapEx.

00:50:24.700 --> 00:50:31.720
So AWS revenue growth came in at 17.5. It was good to be the scale they are.

00:50:31.820 --> 00:50:35.500
They're much bigger scale than everyone else that we've mentioned so far.

00:50:35.500 --> 00:50:37.600
Their operating income is $10 billion.

00:50:37.740 --> 00:50:41.060
And remember, Microsoft's total revenue is $30 billion.

00:50:41.280 --> 00:50:45.800
So their orders of magnitude higher than Azure and I believe Cloud.

00:50:45.960 --> 00:50:48.520
Which I think they pointed out a number of times in their notes.

00:50:49.480 --> 00:50:52.940
Yeah, Jassy actually said, I want to point out that it's way harder to grow

00:50:52.940 --> 00:50:58.980
a $100 billion business, 17%, than a $20 billion business, 30%.

00:50:58.980 --> 00:51:01.740
Wow, your Andy Jassy impersonations are getting better.

00:51:02.080 --> 00:51:06.820
Yeah, thanks. I have to be less excited. I just want to point out to all the investors...

00:51:11.080 --> 00:51:14.180
The so the street wanted accelerating revenue

00:51:14.180 --> 00:51:17.200
and they didn't do it and the important thing

00:51:17.200 --> 00:51:20.500
is to ask why and it's not because they didn't

00:51:20.500 --> 00:51:23.140
have a lot of demand it's this capacity problem again and this is

00:51:23.140 --> 00:51:26.520
why they're spending so much so it's this kind of recurring story

00:51:26.520 --> 00:51:29.940
that is very common across all four

00:51:29.940 --> 00:51:32.840
companies we're talking about here margin declined a

00:51:32.840 --> 00:51:35.600
bit here and management said it's really

00:51:35.600 --> 00:51:38.880
based to accelerated they're investing

00:51:38.880 --> 00:51:41.760
so much in hardware now that they're hitting getting

00:51:41.760 --> 00:51:44.480
hit with this depreciation more quickly than they have

00:51:44.480 --> 00:51:48.660
before so it's not cash based kind of stuff and then they did say stock-based

00:51:48.660 --> 00:51:54.480
compensation is up and that that means to me they're it's getting more expensive

00:51:54.480 --> 00:51:59.660
to find a really good ai and cloud computing people and they're having to pay

00:51:59.660 --> 00:52:03.700
a lot more in stock comp than maybe they kind of thought they would and And for many years.

00:52:03.840 --> 00:52:06.960
That was probably like endemic advantage they had, right? Like was.

00:52:07.140 --> 00:52:07.220
Yeah.

00:52:07.680 --> 00:52:07.900
Yeah.

00:52:08.040 --> 00:52:11.100
Yeah. If you wanted, if you were into highly available systems,

00:52:11.120 --> 00:52:13.760
you went to Amazon, period. There wasn't an alternative.

00:52:14.140 --> 00:52:16.820
And therefore, they could kind of pick and choose candidates.

00:52:17.040 --> 00:52:19.660
Now, it's an arms race to pick these people up.

00:52:19.740 --> 00:52:22.660
And you got Zuck out there, you know, throwing Zuck bucks around like crazy.

00:52:23.600 --> 00:52:28.200
They basically said the demand far exceeds capacity. They can't get enough power.

00:52:28.720 --> 00:52:34.720
They are. All the fabs are maxed out. So getting GPUs, regardless of whose they

00:52:34.720 --> 00:52:38.760
are, their own or NVIDIA's, it all goes to this one company called TSMC.

00:52:38.860 --> 00:52:43.560
We don't have time to talk about, but we're extremely bottlenecked as a planet

00:52:43.560 --> 00:52:45.580
on the ability to build chips right now.

00:52:46.460 --> 00:52:49.900
And then they're just building out everything as fast as they possibly can.

00:52:51.780 --> 00:52:55.840
So investors wanted them to give a little more guidance of how it would accelerate.

00:52:55.840 --> 00:52:57.480
And they were kind of neutral.

00:52:57.580 --> 00:53:02.340
Neutral, I think, I think they have a lot of uncertainty in their ability to build,

00:53:03.230 --> 00:53:07.090
Things are out of their control, like concrete, rebar, dirt,

00:53:07.470 --> 00:53:11.490
power, and silicon, which is also dirt, but another flavor.

00:53:12.130 --> 00:53:18.350
So that was kind of the AWS one was really kind of the you-know-what in the

00:53:18.350 --> 00:53:20.070
punch bowl on the earnings call.

00:53:20.330 --> 00:53:25.830
Which glossed over the one that you're super excited about because it is your favorite category.

00:53:26.050 --> 00:53:30.090
Who do you love more, the ads business or grocery chasing? If you had to pick

00:53:30.090 --> 00:53:33.330
one and take it to a deserted island, which one would you take?

00:53:33.730 --> 00:53:37.610
Yeah, I would take the grocery business because without the grocery business,

00:53:37.730 --> 00:53:38.910
you wouldn't have the ads business.

00:53:39.330 --> 00:53:43.450
But just one other thing I wanted to add on the AWS.

00:53:43.790 --> 00:53:47.550
The interesting thing to me is they talk a lot about this like donut or this

00:53:47.550 --> 00:53:52.150
barbell of demand that it's super like the bleeding edge is creating tons of

00:53:52.150 --> 00:53:55.870
demand. And everybody needs more AI workloads and more tokens.

00:53:56.310 --> 00:54:01.890
But they also are seeing like unexpected increased demand for traditional cloud.

00:54:02.090 --> 00:54:07.510
So there is this carry-on effect where like when you move more workloads to

00:54:07.510 --> 00:54:13.130
AI, you need more of your data in the cloud, which means you need to buy more traditional stuff.

00:54:13.310 --> 00:54:16.310
So I would actually argue like it's a nice time for AWS.

00:54:16.610 --> 00:54:19.850
They're actually capacity constrained on both sides at the moment.

00:54:19.850 --> 00:54:26.990
But you transitioned us to ads and I have a love-hate relationship with this business at Amazon.

00:54:27.270 --> 00:54:30.430
It's an amazing business. It grew 23% for the quarter.

00:54:30.770 --> 00:54:36.550
It's up like 22% year over year. So growing much faster than AWS.

00:54:37.070 --> 00:54:41.250
It significantly exceeded Wall Street's expectations for growth.

00:54:42.050 --> 00:54:47.410
For the quarter, it was like $15.7 billion a revenue.

00:54:47.910 --> 00:54:54.710
But if you do the math on the year, I think we're up to about $68 billion a

00:54:54.710 --> 00:54:57.010
year. That's not even a run rate. The run rate would be bigger.

00:54:57.210 --> 00:55:00.710
But the trailing 12 months, we're at $68 billion.

00:55:01.810 --> 00:55:04.790
And we don't know exactly how profitable that is.

00:55:04.790 --> 00:55:09.830
But if you conservatively guess that selling ad units, which have no cost of

00:55:09.830 --> 00:55:15.750
goods, is 75% gross margin business, which is conservative, then Amazon's ad

00:55:15.750 --> 00:55:19.350
spun off $51 billion in earned income last year.

00:55:19.810 --> 00:55:23.570
AWS that we just talked about spun off $45 billion in earned income.

00:55:23.570 --> 00:55:30.330
So the most conservative estimate of AWS makes it meaningfully more profitable,

00:55:30.510 --> 00:55:34.710
or I'm sorry, the conservative estimate for ads makes it meaningfully more profitable

00:55:34.710 --> 00:55:37.550
than AWS, which is exciting.

00:55:37.910 --> 00:55:43.370
Now, I like to remind people, most of those ads are by third-party sellers.

00:55:43.590 --> 00:55:48.370
Like this is mostly still sponsored product listings from third-party sellers

00:55:48.370 --> 00:55:52.950
that are now, you know, competing with a billion other ASINs on Amazon, literally.

00:55:53.290 --> 00:55:56.670
And the only way they're ever going to be found is if they buy an ad.

00:55:56.830 --> 00:56:03.310
And so that 61% marketplace business that you mentioned really is the unlock for these ads.

00:56:03.750 --> 00:56:07.910
And that's an important point that I feel like a lot of Amazon's competitors miss.

00:56:08.050 --> 00:56:12.270
Like I talk to a lot of traditional retailers that don't have a marketplace

00:56:12.270 --> 00:56:15.190
and they're like, oh my God, Amazon sold $68 billion worth of ads.

00:56:15.310 --> 00:56:17.830
We need to be selling more ads. We need our fair share.

00:56:18.370 --> 00:56:22.390
And I always have to point out, your fair share is much smaller than you think because.

00:56:23.640 --> 00:56:27.260
You don't have this marketplace. You don't have a billion items that are competing

00:56:27.260 --> 00:56:28.640
with each other for visibility.

00:56:29.020 --> 00:56:35.060
Like there's a viable business for you, but it's, it's not directly proportional to Amazon's.

00:56:35.160 --> 00:56:39.640
And so, you know, to my friends, uh, Curie Masters and, and Andrew Lipson out

00:56:39.640 --> 00:56:43.440
there, like you guys are living a collective hallucination by telling everyone

00:56:43.440 --> 00:56:47.040
that ads is a, the huge looker to business for every retailer.

00:56:47.200 --> 00:56:50.540
So I just want to get that, get that snippet in. Cause I know I'll hear from them.

00:56:51.620 --> 00:56:53.360
Good job. Snippet delivered.

00:56:55.100 --> 00:56:58.000
So anything interesting or surprising to

00:56:58.000 --> 00:57:01.640
you i will say the ads business starting to get a little more complicated because

00:57:01.640 --> 00:57:05.640
amazon prime video is a meaningful platform and they have a bunch of exclusive

00:57:05.640 --> 00:57:10.720
licenses and popular products and so they now are ads no longer just talks about

00:57:10.720 --> 00:57:17.160
marketplace and and retail ads it's now talking about ads on this broadcast network too one.

00:57:17.160 --> 00:57:21.080
Thing i wanted to ask you about amazon ads was kind of a dog not barking thing

00:57:21.080 --> 00:57:25.180
because in facebook and google and i didn't cover this in my little google recap

00:57:25.180 --> 00:57:26.360
because i'm trying to keep this

00:57:26.360 --> 00:57:31.860
under three hours but sundar was going on and on about their p max d max.

00:57:31.860 --> 00:57:38.740
Or yeah which is their version of that their p max is their version of um advantage plus from meta yeah.

00:57:39.240 --> 00:57:41.700
I don't like the brand p max we can talk about that later.

00:57:41.700 --> 00:57:43.220
Okay the.

00:57:43.220 --> 00:57:45.500
Whatever it's called,

00:57:46.620 --> 00:57:50.400
And then here, Amazon didn't mention it that I saw at all that they're using AI.

00:57:50.640 --> 00:57:54.380
So is it not applicable here or they're just like making so much money they

00:57:54.380 --> 00:57:55.760
don't even try to optimize it yet?

00:57:56.260 --> 00:58:02.880
Could that be like a 30% bump to this puppy when they start applying AI to this?

00:58:03.080 --> 00:58:06.140
No. So they actually are applying a lot of AI to it.

00:58:07.200 --> 00:58:11.920
They're not talking about it as much, but like for sure, I would actually argue

00:58:11.920 --> 00:58:21.180
Amazon is probably ahead of meta in terms of, AI creative generation for small advertisers.

00:58:21.560 --> 00:58:27.840
So they've automated all of these media buying and placement and bidding strategy tools.

00:58:28.120 --> 00:58:34.640
They have a pretty robust system. It's almost like, though, that where Google

00:58:34.640 --> 00:58:37.500
and Meta grew up before there was AI bidding.

00:58:37.760 --> 00:58:39.980
And so they kind of have, you know, choose your own adventure.

00:58:40.120 --> 00:58:42.380
Do you want the human to do it or do you want the robot to do it.

00:58:42.720 --> 00:58:46.880
Amazon forces you more to have hands off the wheel more often.

00:58:47.080 --> 00:58:51.080
And so they maybe talk about it a little less. I would say it's built in there.

00:58:51.200 --> 00:58:54.740
I would say, and this is controversial, the ad people probably want to chime

00:58:54.740 --> 00:59:00.880
in on this, but like a difference to me between Amazon and Google and certainly

00:59:00.880 --> 00:59:05.580
Meta is that Amazon is inherently more bottom of the funnel.

00:59:06.120 --> 00:59:09.500
So you are already looking for products when you go to Amazon,

00:59:09.840 --> 00:59:12.980
and so those ads are helping you pick one product over another,

00:59:13.200 --> 00:59:18.240
but less often are those ads creating incremental demand for a purchase that

00:59:18.240 --> 00:59:19.660
otherwise didn't exist.

00:59:20.780 --> 00:59:25.540
And that's important, and if you're one of the brands competing for that sale, it's super important.

00:59:26.500 --> 00:59:32.380
The meta ads, when you were just doom scrolling on Instagram and you suddenly

00:59:32.380 --> 00:59:35.320
discovered something you didn't know existed that now you're going to buy,

00:59:35.680 --> 00:59:38.500
that is a more valuable occurrence.

00:59:38.740 --> 00:59:44.520
And meta can charge more for that than Amazon can charge for the brand competition

00:59:44.520 --> 00:59:46.080
after the demand is already there.

00:59:46.080 --> 00:59:50.400
So to me, one of the interesting differences here is because Amazon at the moment

00:59:50.400 --> 00:59:59.000
only lives at the very bottom of the funnel is their ads are a little more tactical and less strategic.

00:59:59.620 --> 01:00:02.740
You know, Google and Meta, I would argue, have had a blend and they've leaned

01:00:02.740 --> 01:00:03.940
one way versus the other.

01:00:03.940 --> 01:00:09.020
And we have awful metrics in the advertising industry that make it hard to really

01:00:09.020 --> 01:00:12.920
understand the difference between just getting attribution for a sale that was

01:00:12.920 --> 01:00:16.320
going to happen anyway and truly incrementally creating a sale.

01:00:16.500 --> 01:00:23.560
But in my mind, these upper funnel platforms like Meta and for sure TikTok have

01:00:23.560 --> 01:00:28.400
more ability to create net new sales and therefore are potentially more valuable

01:00:28.400 --> 01:00:30.540
than the Amazon ad businesses at the moment.

01:00:32.220 --> 01:00:35.520
Interesting. okay the

01:00:35.520 --> 01:00:38.340
i have more questions but we'll yeah we'll go on and we can talk about it part

01:00:38.340 --> 01:00:44.620
two the behind the scenes podcast for guidance amazon and at this point the

01:00:44.620 --> 01:00:48.420
market didn't care because that's during the aws is when they said the capex

01:00:48.420 --> 01:00:49.660
is going to be 200 billion so

01:00:49.660 --> 01:00:53.940
everyone's ears turned off during that this next port part but they said,

01:00:54.980 --> 01:00:58.640
That they're guiding Q1 revenue above consensus.

01:00:59.100 --> 01:01:02.360
And then margins looked like they were a little bit below expectations,

01:01:02.720 --> 01:01:05.600
which kind of people added into the AWS concerns.

01:01:05.840 --> 01:01:10.160
And I think what's going on there is it's not a structural problem in the business.

01:01:10.160 --> 01:01:14.540
It's the fact they just can't get the capacity online as much as the demand is out there.

01:01:14.960 --> 01:01:16.920
So that was it.

01:01:17.600 --> 01:01:21.640
And then, oh, a couple other tidbits I pulled out.

01:01:21.640 --> 01:01:25.600
They got a question on tariffs and jassy basically yawned and said we don't

01:01:25.600 --> 01:01:30.200
see any pricing pressure from that it's been a non-issue for us they also were

01:01:30.200 --> 01:01:33.600
talking a lot about amazon hall having over a million items that's their like

01:01:33.600 --> 01:01:35.240
timu competitor is that right exactly.

01:01:35.240 --> 01:01:39.360
Right yeah and it's in like 23 countries now so they stopped talking about it

01:01:39.360 --> 01:01:43.740
because they launched it right before de minimis got turned off in the u.s which

01:01:43.740 --> 01:01:49.680
was unfortunate timing for them But it appears they've been leaning in and gaining traction. Yeah.

01:01:50.280 --> 01:01:55.260
And then they talked about, they got an explicit question about why are you

01:01:55.260 --> 01:01:59.020
blocking or why are you not listing on Google Shopping, which I thought was interesting.

01:01:59.300 --> 01:02:04.220
So they basically said on July 21st, they stopped and they blocked all the crawlers.

01:02:04.540 --> 01:02:10.180
And they basically said, you know, we view that we have the largest database of products.

01:02:10.180 --> 01:02:13.720
We have the most reviews and we have the deepest pricing data.

01:02:13.720 --> 01:02:18.380
And that's a very important data to us and gives us an information asymmetry

01:02:18.380 --> 01:02:22.380
we want to control, which is a valid, this is kind of, you know,

01:02:22.640 --> 01:02:23.960
very clearly their strategy.

01:02:24.140 --> 01:02:26.480
They're basically saying, we understand how this world works.

01:02:26.640 --> 01:02:33.220
Data is the most valuable thing and we do not want to give away our valuable

01:02:33.220 --> 01:02:34.640
thing, which is data for free.

01:02:34.640 --> 01:02:39.860
So we're locking it behind this, you know, giant gate that no one's going to come into.

01:02:41.220 --> 01:02:42.440
And then, you know,

01:02:43.410 --> 01:02:47.090
The other thing that's interesting is ads, because to your point,

01:02:47.310 --> 01:02:51.690
they're only constrained by the ad load and Amazon seems to see no end insight

01:02:51.690 --> 01:02:53.530
to the amount of ad load they'll add on there,

01:02:53.710 --> 01:02:57.550
which is, I do think it's, I do think they're going to create this self-fulfilling

01:02:57.550 --> 01:03:01.370
prophecy by juicing the ad so much that it's going to drive people away from

01:03:01.370 --> 01:03:02.790
the front end experience of Amazon.

01:03:02.790 --> 01:03:07.950
That's one of the reasons I use Agentic Commerce is for me, outside of Rufus,

01:03:08.030 --> 01:03:10.690
now I will say Rufus has gotten me back to using it.

01:03:10.990 --> 01:03:15.950
The core, the traditional Amazon ad experiences or search experience has gotten

01:03:15.950 --> 01:03:18.930
so polluted with ads, I can't find what I'm looking for.

01:03:19.050 --> 01:03:21.490
And it's way, way too high in my mind.

01:03:21.710 --> 01:03:26.310
But because of that, the ad piece is growing about 23% in AWS,

01:03:26.490 --> 01:03:31.590
17.5. If AWS wasn't constrained, I think it would catch up, but it has constraints

01:03:31.590 --> 01:03:33.730
with the physical world that ads do not.

01:03:35.030 --> 01:03:39.630
Then there were a couple more agentic commerce tidbits, and I promise we're getting to the end here.

01:03:40.050 --> 01:03:44.770
So Michael Morton, also from Moffat and Nathanson, he seems to be the guy that's

01:03:44.770 --> 01:03:47.570
asking this question to everybody, which I need to chat with Michael.

01:03:47.850 --> 01:03:49.590
I need to actually put that on my task list.

01:03:50.210 --> 01:03:53.650
I love that he's asking these hard questions for people. I'm not sure he'll

01:03:53.650 --> 01:03:55.150
get invited back, but we'll see.

01:03:55.510 --> 01:03:59.650
He asked Jassy, what do you think about all this stuff going on with agents?

01:03:59.810 --> 01:04:03.710
Explain your strategy more clearly to us because everyone can't, when Jassy speaks,

01:04:03.710 --> 01:04:06.570
everyone can't tell is he saying they're going to do this

01:04:06.570 --> 01:04:09.270
or not and then everyone's left we all

01:04:09.270 --> 01:04:12.010
have a split opinion kind of like you and I had a

01:04:12.010 --> 01:04:15.610
split opinion a little bit on the meta piece so Jassy

01:04:15.610 --> 01:04:19.550
said I'm very optimistic about the consumer experience that'll ultimately be

01:04:19.550 --> 01:04:23.630
what customers use for agente shopping and I think it's good for customers I

01:04:23.630 --> 01:04:27.770
think it's going to make it easier for them it's a big piece of why we've invested

01:04:27.770 --> 01:04:31.610
as significantly we have in Rufus so So he took the question and pivoted to

01:04:31.610 --> 01:04:33.190
Rufus, which is a smart PR strategy.

01:04:33.350 --> 01:04:36.570
If you haven't checked out Rufus recently, I really encourage you to do this.

01:04:36.710 --> 01:04:40.830
I actually think he's right on this. I've gotten much, much better and it's

01:04:40.830 --> 01:04:43.610
gotten much, much better and getting better every month.

01:04:43.950 --> 01:04:47.990
Then this was interesting. They, this is a new stat as far as I can tell.

01:04:48.250 --> 01:04:51.710
We have 300 million customers who used Rufus throughout 2025.

01:04:51.750 --> 01:04:54.250
I bet that was super back and loaded.

01:04:54.570 --> 01:05:00.090
And then customers who use Rufus are about 60% more likely to complete a purchase.

01:05:00.610 --> 01:05:05.050
Okay. So logically, if that was true, you'll get rid of the search experience

01:05:05.050 --> 01:05:09.510
and do this, except there is a little fly in the ointment and it's that ad business.

01:05:09.730 --> 01:05:14.410
So you, you know, I think Google is close to making the switch and I think Amazon

01:05:14.410 --> 01:05:16.210
has not figured out how to monetize

01:05:16.210 --> 01:05:19.110
Rufus and they're not going to switch that until they do. So yeah.

01:05:19.880 --> 01:05:23.860
It is, it does, it is an interesting decision point, right?

01:05:23.960 --> 01:05:28.380
Because if this really improved conversions that much, you would,

01:05:28.480 --> 01:05:32.380
and you didn't have that business, I think you would instantly get more,

01:05:32.620 --> 01:05:35.360
as many people in the Rufus as you can, could. Yeah. What do you think?

01:05:35.740 --> 01:05:39.560
Well, so I generally agree with you, although I feel like you tripped into the

01:05:39.560 --> 01:05:41.000
biggest fallacy in this whole thing.

01:05:41.120 --> 01:05:43.800
And this should be, we should do a whole podcast about this.

01:05:44.660 --> 01:05:47.620
Customers that use rufus are 60% more likely to

01:05:47.620 --> 01:05:50.740
complete a purchase that is true that doesn't

01:05:50.740 --> 01:05:53.680
mean that it's creating 60% more

01:05:53.680 --> 01:05:59.220
purchases uh causality yes correlation versus causation and we know for a fact

01:05:59.220 --> 01:06:03.600
we don't have to wonder we know for a fact it's correlation not causation because

01:06:03.600 --> 01:06:08.480
if it was correlation 38% of customers use rufus they're 60% more likely to

01:06:08.480 --> 01:06:11.400
purchase they'd be growing a lot faster than 11%.

01:06:12.840 --> 01:06:17.740
It's evident in their data that the customers that like Amazon the most and

01:06:17.740 --> 01:06:20.840
buy the most from Amazon are more likely to use Rufus.

01:06:21.040 --> 01:06:26.680
So that's great. There's nothing wrong with that. But just don't confuse correlation and causation.

01:06:26.860 --> 01:06:30.460
So it's a nice vanity stat for Andy to talk about.

01:06:30.660 --> 01:06:35.140
It does not mean they have some new unlock that's dramatically creating tons

01:06:35.140 --> 01:06:39.040
of new purchases. So that's the sort of first thing.

01:06:39.160 --> 01:06:43.820
But that question to me unlocked the most interesting conversation in this whole deal, which is...

01:06:44.960 --> 01:06:51.540
Andy, you guys aren't on the third-party AI commerce experiences.

01:06:51.820 --> 01:06:53.160
Like all those hundreds of millions

01:06:53.160 --> 01:06:56.360
of Walmart products are for sale right now on ChatGBT. You're not.

01:06:56.580 --> 01:06:59.920
Are you worried about that, right? And he had a two-part answer.

01:07:00.060 --> 01:07:03.020
He's like, part one, we'll probably eventually get there.

01:07:03.140 --> 01:07:06.460
We think the experiences are broken there and they need to get better.

01:07:06.460 --> 01:07:09.320
So we need to work with them to improve the data and the experiences.

01:07:09.320 --> 01:07:12.740
And we need to agree on the right value transfer between us and them,

01:07:12.960 --> 01:07:17.220
which is code for we need to make sure we get the right margins from that.

01:07:17.360 --> 01:07:21.200
But he kind of implied that'll all get worked out eventually and we'll find

01:07:21.200 --> 01:07:22.860
a way to have a presence on all those things.

01:07:22.900 --> 01:07:28.000
But he drew this distinction between what he calls horizontal LLMs,

01:07:28.200 --> 01:07:30.780
which are kind of general purpose LLMs that do a lot of different things,

01:07:30.960 --> 01:07:33.840
one of which could be shopping, and vertical LLMs.

01:07:33.960 --> 01:07:39.720
And he would call Rufus a vertical LLM. And he made a passionate plea for why

01:07:39.720 --> 01:07:41.800
vertical LLMs are better.

01:07:42.060 --> 01:07:46.360
And in the long run, he believes customers are going to pick vertical LLMs.

01:07:46.480 --> 01:07:49.580
So when you go shopping, you're not going to want to go to a general robot.

01:07:49.700 --> 01:07:51.800
You're going to want to go to a shopping specific robot.

01:07:52.000 --> 01:07:54.700
And he would argue Rufus is the best version of that.

01:07:55.620 --> 01:08:01.380
I don't know what the answer is, but I'm way less convinced that I'm way less certain than Andy is.

01:08:01.560 --> 01:08:06.400
And I would argue Amazon's biggest advantage, the unlock that has caused them

01:08:06.400 --> 01:08:09.140
to win the most in commerce is assortment.

01:08:09.420 --> 01:08:12.760
That people don't want to go to a different store for every product.

01:08:12.960 --> 01:08:16.340
And Amazon has now taken a billion products and put them all under one roof.

01:08:16.500 --> 01:08:20.040
Like it's the number one advantage that Amazon has. It's the number one utility

01:08:20.040 --> 01:08:23.480
that customers choose Amazon for is that assortment.

01:08:23.780 --> 01:08:28.320
And the robots make that assortment irrelevant.

01:08:28.620 --> 01:08:32.020
Like the robots don't care if they have to buy the items from three different

01:08:32.020 --> 01:08:33.380
vendors or one different vendor.

01:08:33.620 --> 01:08:37.120
And so I like whether Andy wants to admit it on an earnings call or not,

01:08:37.400 --> 01:08:40.580
these horizontal bots are a huge threat.

01:08:40.740 --> 01:08:43.820
Now, do they have less shopping data than Amazon has right now?

01:08:43.960 --> 01:08:47.840
Yes, they do. Do they have, you know, rougher commerce experiences? Yes, they do.

01:08:48.920 --> 01:08:51.600
But each side of this fence has different strengths and weaknesses.

01:08:51.960 --> 01:08:56.000
And I do think that's going to be the fundamental battle of the next 18 months

01:08:56.000 --> 01:09:00.940
is, you know, are people going to be satisfied to shop from the microchip that

01:09:00.940 --> 01:09:02.380
John Ives installs in our brain?

01:09:02.380 --> 01:09:06.420
Or are we still going to go to Amazon and use Rufus 10.0 to do all our shopping?

01:09:06.640 --> 01:09:10.060
And the answer to that question is going to decide, you know,

01:09:10.120 --> 01:09:12.360
who the most valuable company is 10 years from now.

01:09:13.220 --> 01:09:17.500
Yep. Okay. So to summarize, here's kind of the answer to the AI bubble. Are we in a bubble?

01:09:18.160 --> 01:09:21.780
So let me frame it this way. So we had these companies say to us,

01:09:21.920 --> 01:09:26.520
here's the demand that we cannot satisfy right now, also known as a backlog.

01:09:26.740 --> 01:09:30.600
If we had the capacity, this is the revenue that would come from that capacity.

01:09:31.000 --> 01:09:36.180
Google, 240 billion. Azure, 368 billion. That's the biggest one.

01:09:36.740 --> 01:09:38.500
AWS, 244 billion.

01:09:39.180 --> 01:09:44.840
Add that together, that's $852 billion of revenue, like almost a trillion dollars

01:09:44.840 --> 01:09:46.600
of revenue, which is crazy.

01:09:47.240 --> 01:09:50.720
Then here's the CapEx they want to spend on that. Now, this is a little apples

01:09:50.720 --> 01:09:53.300
and oranges because I'm going to throw Meta in here and Meta doesn't really

01:09:53.300 --> 01:09:56.860
have a backlog because they're just kind of dogfooding this to make their ads better.

01:09:57.180 --> 01:09:59.960
But they're going to do 115 to 135.

01:10:00.680 --> 01:10:04.200
Microsoft, 160 billion. Google, 185 billion.

01:10:04.940 --> 01:10:10.000
AWS, the biggest, 200 billion. Now, they didn't tell us what inside of there

01:10:10.000 --> 01:10:12.360
is Azure, fulfillment centers, and Leo.

01:10:12.560 --> 01:10:16.060
But you've got to imagine Azure is the lion's share of it. But Leo is pretty

01:10:16.060 --> 01:10:17.360
expensive because you're buying satellites.

01:10:17.620 --> 01:10:23.540
So maybe it's 150, but let's just call it 200 because what's 50 billion between trends, right?

01:10:23.980 --> 01:10:28.340
And that gives us 700 to 750 billion in CapEx.

01:10:28.680 --> 01:10:33.020
So basically saying in CapEx, revenue is annualized.

01:10:33.500 --> 01:10:39.100
CapEx is seven years or 10. I think they're now saying these chips last,

01:10:39.220 --> 01:10:42.200
they have an effective life of, I can't remember if it's normally five and they're

01:10:42.200 --> 01:10:44.120
saying seven or seven to 10, whatever it is.

01:10:44.120 --> 01:10:46.800
So that is why they're doing

01:10:46.800 --> 01:10:49.880
it and if this math is right and we trust that these

01:10:49.880 --> 01:10:52.920
three companies aren't all lying with four companies i guess

01:10:52.920 --> 01:10:58.440
three on the demand side then this is kind of a no-brainer for so any any business

01:10:58.440 --> 01:11:02.100
person would make this trade-off every day if they had access to the capital

01:11:02.100 --> 01:11:05.060
and these guys do because they're pulling it out of free cash flow they're basically

01:11:05.060 --> 01:11:09.580
saying it is way smarter for us to invest this dollar here than anywhere else

01:11:09.580 --> 01:11:12.640
we see acquisitions share buybacks, interest rates.

01:11:13.380 --> 01:11:15.440
Startup investing, everything out there.

01:11:15.700 --> 01:11:20.520
This has got the highest IRR out there. So I think it's a very clear signal

01:11:20.520 --> 01:11:28.480
if you really put this together that this is a, the craziest thing we've ever seen in my 30 years,

01:11:28.700 --> 01:11:31.080
you know, being in this world and understanding this stuff.

01:11:31.540 --> 01:11:36.580
And if we get, you know, 80% of this to come out, we could have five and $10

01:11:36.580 --> 01:11:39.320
trillion companies coming out of this because they're basically adding a trillion

01:11:39.320 --> 01:11:43.200
dollars of revenue amongst these companies and this big step up function.

01:11:45.020 --> 01:11:48.100
That's, I do not think it's a bubble. That's where I come out on it.

01:11:48.600 --> 01:11:52.460
Oh, interesting. Yeah. So, and you're way more sophisticated investor than I

01:11:52.460 --> 01:11:54.780
am. And so I'll defer to you on that.

01:11:54.920 --> 01:11:57.720
Like to me, I a hundred percent agree with you.

01:11:57.960 --> 01:12:00.660
The there's, there's a lot more gas in this car.

01:12:00.980 --> 01:12:05.400
It's, I guess intuitively in my mind, it's hard to call it like this.

01:12:05.680 --> 01:12:09.980
There's so much hype in this space. It's such the bleeding edge and it's growing so fast.

01:12:10.100 --> 01:12:12.800
And it's, everybody's talking about so much, like, of course,

01:12:12.800 --> 01:12:17.600
it's a bubble, like, like, is it the very front of the bubble or the very end of the bubble?

01:12:17.800 --> 01:12:21.640
Like, are we going to keep pouring gas in that bubble for five more years before a burst?

01:12:21.820 --> 01:12:25.420
And, you know, when when it does burst and normalizes, will it be bigger and

01:12:25.420 --> 01:12:26.400
smaller than it is today?

01:12:26.600 --> 01:12:30.000
I agree with you. I think there's a lot more room in it.

01:12:30.100 --> 01:12:34.700
And I think like this is inherently a huge market and a huge opportunity,

01:12:34.700 --> 01:12:40.300
but it probably is simultaneously slightly overhyped and there's probably you

01:12:40.300 --> 01:12:44.420
know slightly too much exuberism in it about the specific companies and where

01:12:44.420 --> 01:12:47.200
they are today is that could i be.

01:12:47.200 --> 01:12:51.280
Right okay yeah and it also so i'm less

01:12:51.280 --> 01:12:53.980
qualified you know i'm not gonna go into cnbc and talk about the

01:12:53.980 --> 01:12:57.360
bubble thing but this is this

01:12:57.360 --> 01:13:01.560
is why i think people that aren't really pivoting

01:13:01.560 --> 01:13:05.120
towards this in our space because they don't think the companies are serious

01:13:05.120 --> 01:13:09.320
or are you know these companies this is the most serious thing these companies

01:13:09.320 --> 01:13:13.060
ever done you know the amount of money they're spending and their career you

01:13:13.060 --> 01:13:17.440
know they're all betting their companies on ai and then for every one of them

01:13:17.440 --> 01:13:20.980
agentic is a big pillar of this so yeah and and by.

01:13:20.980 --> 01:13:25.980
The way that's not just seven random people that's seven highly accomplished

01:13:25.980 --> 01:13:29.100
people with pretty good track records that are darn good operators.

01:13:29.380 --> 01:13:32.580
Yeah, these are the best operators, you know, except Tim Cook.

01:13:32.860 --> 01:13:36.300
I put him up there and, you know, maybe the CEO of Exxon or something or something

01:13:36.300 --> 01:13:39.400
like that. And Elon, you know, these are the best operators on the planet.

01:13:39.620 --> 01:13:43.380
Like, you know, five of 10 saying this is where we're betting money right now.

01:13:44.370 --> 01:13:48.850
Yeah. So look, we may have set the record for the longest podcast. I'm so sorry.

01:13:49.310 --> 01:13:53.490
Hopefully it's been valuable. I'm just going to tease one other thing that we

01:13:53.490 --> 01:13:54.530
don't have time to get into.

01:13:54.770 --> 01:13:58.310
But also last week, Walmart changed leadership.

01:13:58.590 --> 01:14:03.090
So Doug McMillan, the very successful CEO, stepped down.

01:14:03.310 --> 01:14:07.270
There was no surprise about who his successor would be. It's this John Furner.

01:14:07.790 --> 01:14:14.890
But what has been super interesting is who backfills all of John Furner and everyone that moves up.

01:14:15.050 --> 01:14:18.150
So John Furner goes from president of the U.S. to CEO of Walmart,

01:14:18.330 --> 01:14:20.690
Inc., who becomes the new president of the U.S.

01:14:20.730 --> 01:14:24.690
And there were like three totally viable traditional Walmart candidates that

01:14:24.690 --> 01:14:27.010
everybody was betting on. I had a bet on one.

01:14:27.770 --> 01:14:33.350
My bet proved wrong. We were all wrong because the new CEO of Walmart U.S.

01:14:33.710 --> 01:14:38.470
Is David Gugina, who was formerly the chief e-commerce officer at Walmart.

01:14:38.710 --> 01:14:42.590
So to me, that is big news. The largest retailer in the United States,

01:14:42.750 --> 01:14:47.090
the CEO is now the former head of e-commerce.

01:14:47.310 --> 01:14:51.870
We've been talking about these digital guys getting in the C-suite for a long time.

01:14:52.130 --> 01:14:57.550
And now it's the CEO chair at Walmart. So that to me is a huge deal.

01:14:57.690 --> 01:15:00.610
And a lot of his lieutenants are now moving up.

01:15:00.810 --> 01:15:05.790
So one of his lieutenants runs all of marketing at Walmart. So it's an incredible new world.

01:15:06.050 --> 01:15:09.030
And in that world, Walmart just

01:15:09.030 --> 01:15:14.350
last week or two days ago passed the $1 trillion market cap valuation.

01:15:14.350 --> 01:15:20.110
So I think they're the first traditional retailer to be valued at over a trillion

01:15:20.110 --> 01:15:21.530
dollars. And that to me is amazing.

01:15:22.750 --> 01:15:26.730
I'll take the framing on the long episode. I think people love our Amazon earnings

01:15:26.730 --> 01:15:32.090
episodes and they've been dying for more content and we're delivering it.

01:15:32.450 --> 01:15:33.370
We're listening to our audience.

01:15:33.530 --> 01:15:36.890
To the 5,000 people that complained about our show frequency at NRF,

01:15:37.130 --> 01:15:38.570
be careful what you ask for.

01:15:39.070 --> 01:15:42.090
Yep, just listen to it in three chunks and it's like having three episodes.

01:15:42.410 --> 01:15:47.290
And yeah, it's less work for our audio team to split it into three. So do it yourself.

01:15:47.730 --> 01:15:48.570
There you go.

01:15:49.630 --> 01:15:50.110
Awesome.

01:15:50.290 --> 01:15:53.350
Scott, always fun talking to you. And as always, I hope, though,

01:15:53.610 --> 01:15:57.450
our listeners got some value out of it. And we are still accepting reviews.

01:15:57.610 --> 01:16:01.870
As old as we are, the reviews engine is still open. So you can still jump on

01:16:01.870 --> 01:16:04.770
iTunes and give us that five-star review. And we're very grateful if you do.

01:16:05.330 --> 01:16:10.730
Yeah, and because it's a six-hour episode, I think it's worthy of six five-stars. So leave those 30 stars.

01:16:11.550 --> 01:16:15.570
Absolutely. And until next time, happy commercing.

01:16:16.030 --> 01:16:17.430
Happy agentic commercing.