AI mania, faster delivery, and other takeaways from Andy Jassy’s letter to Amazon shareholders

This morning, Amazon CEO Andy Jassy printed his 2023 letter to shareholders.

The 12 months started with fairly a splash for Amazon, as the corporate instituted the most important job cuts in its historical past, laying off more than 27,000 employees. The layoffs got here on the heels of a tricky interval for the e-commerce large in 2022 when inventory fell 51%. 

Nevertheless, Jassy opened his letter by stating he has “much more” enthusiasm and optimism for Amazon’s future than presently final 12 months, revealing that Amazon’s income for 2023 was up 12% 12 months over 12 months. Listed here are the primary takeaways from what he mentioned subsequent.

Supply speeds will get even sooner

Excellent news for the impatient: Over seven billion Amazon objects arrived similar day or subsequent day this 12 months, and Jassy expects even sooner supply occasions in 2024, with Q1 already outpacing final 12 months. The corporate plans to double its success facilities, that are same-day amenities that streamline the time between merchandise choice and delivery to 11 minutes. Along with extra of those amenities, Jassy says Amazon plans to broaden its drone supply service (known as Prime Air), which can permit the corporate to get clients packages in lower than an hour. 

AI is talked about 33 occasions

Jassy is sizzling on synthetic intelligence, writing that when folks ask him at the moment “what’s subsequent,” he says it must be “GenerativeAI.” He wrote that whereas a lot of the general public is consumed by AI functions comparable to ChatGPT, Amazon views generative AI in three distinct layers, with the applying being simply one in all them. He offered perception into how Amazon is approaching every:

• The underside layer, he said, is for builders and corporations trying to construct basis fashions—the important thing for which is the chip. Jassy defined that whereas Amazon will proceed to supply the broadest assortment of Nvidia chips of any supplier, provide has been scarce and price stays a problem.
• The center layer is for purchasers searching for to customise one of many present basis fashions with their very own knowledge. On that entrance, Amazon now has a service known as Bedrock that lets corporations construct generative AI functions.
• The ultimate layer is the applying layer, which Amazon has constructed a considerable variety of throughout each Amazon shopper enterprise. Purposes embrace Rufus, an AI-powered purchasing assistant, an “much more succesful Alexa,” and elevated promoting capabilities. 

Dedication to cost-cutting

“Price to serve” is down on a per-unit foundation globally for the primary time since 2018, Jassy wrote, with U.S. numbers down by greater than 45 cents per unit 12 months over 12 months. A part of this stems from Amazon’s regionalization efforts, which have minimize transportation distances and prices.

Amazon’s working earnings in 2023 improved by 201% 12 months over 12 months. Trying to 2024, Jassy states that Amazon stays dedicated to persevering with to decrease prices, emphasizing success structure and stock placement areas. 

Promoting success

Amazon’s promoting income has grown 24% 12 months over 12 months, primarily pushed by sponsored advertisements. Jassy wrote Amazon has added Sponsored TV, which permits manufacturers to create campaigns that may seem on as much as round 30 streaming TV companies, comparable to Twitch and Amazon FreeVee. The corporate has additionally expanded by (controversially) including advertisements to Prime Video exhibits and flicks, which Jassy said permits manufacturers to achieve 200 million month-to-month viewers. 

Now in 2024, Amazon inventory is close to an all-time excessive, up 22%. Jassy concluded the letter by stating, “There has by no means been a time in Amazon’s historical past the place we’ve felt there’s a lot alternative to make our clients’ lives higher and simpler.”