This morning, Amazon CEO Andy Jassy published his 2023 letter to shareholders.
The year began with quite a splash for Amazon, as the company instituted the largest job cuts in its history, laying off more than 27,000 employees. The layoffs came on the heels of a tough period for the e-commerce giant in 2022 when stock fell 51%.
However, Jassy opened his letter by stating that he has “even more” enthusiasm and optimism for Amazon’s future than at this time last year, revealing that Amazon’s revenue for 2023 was up 12% year over year. Here are the main takeaways from what he said next:
Delivery speeds will get even faster
Good news for the impatient: Over seven billion Amazon items arrived same day or next day this year, and Jassy expects even faster delivery times in 2024, with the first quarter already outpacing last year. The company plans to double its fulfillment centers, which are same-day facilities that streamline the time between item selection and shipping to 11 minutes. In addition to more of these facilities, Jassy says Amazon plans to expand its drone delivery service (called Prime Air), which will allow the company to get customers packages in less than an hour.
AI is mentioned 33 times
Jassy is hot on artificial intelligence, writing that when people ask him today “what’s next,” he says it would have to be “GenerativeAI.” He wrote that while much of the public is consumed by AI applications such as ChatGPT, Amazon views generative AI in three distinct layers, with the application being just one of them. He provided insight into how Amazon is approaching each:
- The bottom layer, he stated, is for developers and companies looking to build foundation models—the key for which is the chip. Jassy explained that while Amazon will continue to offer the broadest collection of Nvidia chips of any provider, supply has been scarce and cost remains an issue.
- The middle layer is for customers seeking to customize one of the existing foundation models with their own data. On that front, Amazon now has a service called Bedrock that lets companies build generative AI applications.
- The final layer is the application layer, which Amazon has built a substantial number of across every Amazon consumer business. Applications include Rufus, an AI-powered shopping assistant, an “even more capable Alexa,” and increased advertising capabilities.
Commitment to cost-cutting
“Cost to serve” is down on a per-unit basis globally for the first time since 2018, Jassy wrote, with U.S. numbers down by more than 45 cents per unit year over year. Part of this stems from Amazon’s regionalization efforts, which have cut transportation distances and costs.
Amazon’s operating income in 2023 improved by 201% year over year. Looking to 2024, Jassy states that Amazon remains committed to continuing to lower costs, emphasizing fulfillment architecture and inventory placement areas.
Advertising success
Amazon’s advertising revenue has grown 24% year over year, primarily driven by sponsored ads. Jassy wrote Amazon has added Sponsored TV, which allows brands to create campaigns that will appear on up to around 30 streaming TV services, such as Twitch and Amazon FreeVee. The company has also expanded by (controversially) adding ads to Prime Video shows and movies, which Jassy stated allows brands to reach 200 million monthly viewers.
Now in 2024, Amazon stock is near an all-time high, up 22%. Jassy concluded the letter by stating, “There has never been a time in Amazon’s history where we’ve felt there is so much opportunity to make our customers’ lives better and easier.”
