Amazon CEO cites AI, speed, costs, ads in shareholder letter

Andy Jassy, president and CEO of Amazon Inc., sounded optimistic in his review of 2023 in an annual letter to the company’s shareholders.

In the letter, Jassy reviewed 2023 financial results such as total revenue growth to $575 billion from $514 billion, or 12% year-over-year. By segment, North America revenue increased 12% year-over-year from to $353 billion from $316 billion, while international revenue grew 11% year-over-year to $131 billion from $118 billion and o $131B and Amazon Web Services (AWS) revenue increased 13% year-over-year to $91 billion from $80 billion.

Following are highlights from results Jassy cited in a number of key business areas:

Delivery speed

According to Jassy, in 2023, Amazon delivered at the fastest speeds ever to Prime members, with more than 7 billion items arriving same or next day, including more than 4 billion in the U.S. and more than 2 billion in Europe. 

In the U.S., Jassy said this resulted from stocking inventory in regional fulfillment centers near last-mile delivery stations and the expansion of same-day facilities, where in 2023, Amazon increased the number of items delivered same day or overnight by nearly 70% year-over-year. 

Cost to serve

In 2023, for the first time since 2018, Amazon reduced its cost to serve on a per unit basis globally. In the U.S. alone, Jassy said cost to serve was down by more than $0.45 per unit year-over-year, allowing the company to invest in speed improvements and afford adding more selection at lower average selling prices.

Inbound fulfillment architecture and resulting inventory placement are areas of focus in 2024.

Amazon Web Services/Artificial intelligence

The Amazon Web Services hosted cloud division announced its next generation of generalized CPU chips (Graviton4) as well as AWS Trainium2 chips, which will deliver up to four times faster machine learning training for generative AI applications and three times more memory capacity than Trainium1. 

Amazon also continued expanding our AWS infrastructure footprint, now offering 105 Availability Zones within 33 geographic regions globally, with six new regions coming (Malaysia, Mexico, New Zealand, the Kingdom of Saudi Arabia, Thailand, and a second German region in Berlin). 

In generative AI, Jassy said Amazon added dozens of features to Amazon SageMaker to make it easier for developers to build new Foundation Models (“FMs”), and also invented and delivered the Amazon Bedrock service which lets companies leverage existing FMs to build generative AI applications, as well as the Amazon Q coding assistant.

Holiday sales events and discount savings

Jassy cited Amazon’s holiday sales promotions, including the Prime Big Deal Days exclusive October event for Prime members to provide an early start on holiday shopping and extended Black Friday and Cyber Monday holiday shopping event open to all customers, which Jassy said became the e-tailer’s largest revenue event ever. 

For all of 2023, Jassy said customers saved nearly $24 billion across millions of deals and coupons, almost 70% more than the prior year.

Advertising

According to Jassy, Amazon’s advertising business grew 24% year-over-year from $38 billion in 2022 to $47 billion in 2023, primarily driven by sponsored ads. The company added Sponsored TV to this offering, a self-service solution for brands to create campaigns that can appear on more than 30 streaming TV services, including Amazon Freevee and Twitch, and have no minimum spend. 

Recently, Amazon introduced ads into Prime Video shows and movies.

“Overall, 2023 was a strong year, and I’m grateful to our collective teams who delivered on behalf of customers,” Jassy said in the letter. “These results represent a lot of invention, collaboration, discipline, execution, and reimagination across Amazon. Yet, I think every one of us at Amazon believes that we have a long way to go, in every one of our businesses, before we exhaust how we can make customers’ lives better and easier, and there is considerable upside in each of the businesses in which we’re investing.”