AMZN Stock | Amazon.com, Inc. Q1 2026 Earnings Call

Thank you for standing by. Good day everyone and welcome to the Amazon.com first quarter 2026 financial results teleconference. At this time all participants are in a listen-only mode. After the presentation we will conduct a question and answer session. Today's call is being recorded and for opening remarks I will be turning the call over to the vice president of investor relations, Mr. Dave Fickes. Thank you sir. Please go ahead.

Hello and welcome to our Q1 2026 financial results conference call. Joining us today to answer your questions is Andy Jassy, our CEO, and Brian Olsavsky, our CFO. As you listen to today's conference call, we encourage you to have our press release in front of you, which includes our financial results, as well as metrics and commentary on the quarter. Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2025. Our comments and responses to your questions reflect management's views as of today, April 29th, 2026 only, and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and our filings with the SEC, including our most recent annual report on form 10-K and subsequent filings.

During this call, we may discuss certain non-GAAP financial measures. In our press release, slides accompanying this webcast and our filings with the SEC, each of which is posted on our IR website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures.

Our guidance incorporates the order trends that we've seen to date and what we believe today to be appropriate assumptions. Our results are inherently unpredictable and may be materially affected by many factors including fluctuations in foreign exchange rates and energy prices, changes in global economic and geopolitical conditions, tariff and trade policies, resource and supply volatility, including from memory chips, and customer demand and spending, including the impact of recessionary fears, inflation, interest rates, regional labor market constraints, world events, the rate of growth of the internet, online commerce, cloud services, and new and emerging technologies, and the various factors detailed in our filings with the SEC. Our guidance assumes, among other things, that we don't conclude any additional business acquisitions, restructurings, or legal settlements. It's not possible to accurately predict demand for our goods and services, and therefore our actual results could differ materially from our guidance. And now, I'll turn the call over to Andy.

Thanks, Dave. We're reporting $181.5 billion in revenue, up 17% year-over-year. Excluding the $2.9 billion favorable impact from foreign exchange, net sales increased 15%. Operating income was $23.9 billion. Q1 was a strong quarter for Amazon. Starting with AWS, growth continued to accelerate, up 28% year-over-year, the fastest growth rate in 15 quarters, up $2 billion quarter over quarter, the largest Q4 to Q1 AWS revenue increase ever. AWS is now a $150 billion annualized revenue run rate business. It's very unusual for a business to grow this fast on a base this large. And the last time we saw growth at this clip, AWS was roughly half the size. We've never seen a technology grow as rapidly as AI. Amazon is already a leader and companies continue to choose AWS for AI.

To put our growth in perspective, three years after AWS launched, it had a $58 million revenue run rate. In the first three years of this AI wave, AWS's AI revenue run rate is over $15 billion, nearly 260 times larger. There are several reasons customers are choosing AWS for AI. First, we've built broader capabilities than others. That includes model building with SageMaker, which reduces training time by up to 40%. High performance inference with the leading selection of frontier models in Bedrock, which saw 170% growth in customer spend quarter over quarter and processed more tokens in Q1 than all prior years combined. We're excited to make OpenAI's models available in Bedrock. Yesterday we added OpenAI's GPT 5.4 model with 5.5 coming soon. Yesterday we also started the preview of Amazon Bedrock managed agents powered by OpenAI, the stateful runtime environment that enables any organization to build generative AI applications and agents at production scale. We believe that modern agentic applications will be stateful and this new technology will rapidly accelerate agentic AI adoption. OpenAI has said they're already seeing unprecedented demand for this new product and we're seeing heavy customer interest as well.

Most of the value companies derive from AI will be through agents. In AWS, customers can build agents with their proprietary data in Strands, which has been downloaded more than 25 million times and saw 3x more downloads quarter over quarter. Customers can deploy agents with enterprise scale, security, and reliability with AgentCore, which is being used to deploy an agent as frequently as every 10 seconds. We also offer turnkey agents for coding, software migrations, business operations, and knowledge workers in Q Developer, Transform, Connect, and Quick, and they continue to resonate with customers. The number of developers using Q Developer more than doubled quarter over quarter and enterprise customer usage increased nearly 10x. Customers have used Transform to save over 1.56 million hours of manual effort when migrating and modernizing their workloads. The number of new customers using Quick has grown more than four times quarter over quarter and we just announced V1 of our Quick Desktop app yesterday. It's very compelling as it can query your email, calendar, Slack, local files, and several other applications you use every day to flag important communications, retrieve and summarize information, make recommendations, compose and send communications to others, and create agents that highlight or automatically do work that you used to have to do yourself. You can easily keep refining your preferences, and Quick's advanced knowledge graph enables its AI agents to automatically learn from your interactions to become more personalized over time. One of our enterprise customers just told us, 'Quick isn't just improving how we work, it's letting us reimagine it.'

Second, and another reason customers continue choosing AWS is that as they expand their use of AI, they want their inference to reside near their other applications and data. And much more of it resides in AWS than any place else. Third, as customers expand their AI usage, they also want to consume additional non-AI services, and they're choosing AWS because we've built the broadest and most capable core offerings by a wide margin. We offer thousands of features across compute, storage, databases, analytics, security, and more. And Gartner consistently recognizes AWS's leadership across their major cloud evaluation areas. Fourth, AWS has the strongest security and operational performance of any AI and infrastructure provider, and startups, enterprises, and governments continue to choose AWS as the foundation for their most critical workloads. These are some of the reasons even more customers are choosing AWS. And just since last quarter's call, we've announced new agreements with OpenAI, Anthropic, Meta, Nvidia, Uber, US Bank, Fox, Southwest Airlines, US Army, Bloomberg, Cerebras, AT&T, Nokia, Fundamental, the National Geographic Society, PGA Tour, and many more.

Our chips business continues to grow rapidly and is larger than what a lot of folks thought. We saw nearly 40% quarter over quarter growth in Q1 and our annual revenue run rate is now over $20 billion and growing triple-digit percentages year-over-year. But this somewhat masks the size. If our chips business was a standalone business and sold chips produced this year to AWS and other third parties as other leading chip companies do, our annual revenue run rate would be $50 billion. As best as we can tell, our custom silicon business is now one of the top three data center chip businesses in the world. And the speed at which we've gotten here is extraordinary. And we have momentum for our custom AI silicon. We've recently shared very large multi-year multi-gigawatt Trainium commitments from the two leading AI labs in the world in Anthropic and OpenAI, as well as an increasing number of companies like Uber betting on Trainium, and we now have over $225 billion in revenue commitments for Trainium. Our Trainium 2 chip has about 30% better price performance than comparable GPUs and is largely sold out. Trainium 3, which just started shipping at the start of 2026 and is 30 to 40% more price performant than Trainium 2, is nearly fully subscribed. And much of Trainium 4, which is still about 18 months from broad availability, has already been reserved.

Amazon Bedrock, which is used expansively by over 125,000 customers, runs most of its inference on Trainium, and almost 80% of the Fortune 100 companies are using Bedrock. We also just announced that Meta has committed to using tens of millions of Graviton cores. Graviton is our industry-leading CPU chip which allows Meta to run the CPU intensive workloads behind agentic AI with the performance and efficiency they need at their scale. AI is commonly seen as a GPU story, but the rise of agentic workloads, real-time reasoning, code generation, reinforcement learning, and multi-step task orchestration is driving massive CPU demand as well. As AI systems shift from answering questions to taking actions and as post-training and inference scale up, the compute required pulls heavily on CPUs. That's why Meta chose Graviton, which delivers up to 40% better price performance than any other x86 processors and now used by 98% of the top 1000 EC2 customers. Nobody has a better set of chips across AI and CPU workloads than AWS with Trainium and Graviton. And we're unusually well positioned for this AI inflection we're in the early stages of experiencing.

While the largest number of AI chips we're bringing in are Trainium, we continue to have a deep partnership with Nvidia. We have immense respect for them, continue to order substantial quantities, will be partners for as long as I can foresee. And we'll always have customers who want to run NVIDIA on AWS. And we will also have a very large chips business ourselves. Customers always want choice. It's always been true and always will be true. Different companies will offer different benefits for customers and the uniquely strong price performance that Trainium offers is compelling to our external and internal customers. For perspective at scale, we expect Trainium will save us tens of billions of dollars of capex each year and provide several hundred basis points of operating margin advantage versus relying on others' chips for inference.

Finally, we continue to be confident in the long-term capex investments we're making. Of the AWS capex we intend to spend in 2026, much of which will be installed in future years, we have high confidence this will be monetized well as we already have customer commitments for a substantial portion of it and that it will yield compelling operating margins and ROIC. As we've been sharing, the faster AWS grows, the more short-term capex we'll spend. AWS has to lay out cash for land, power, buildings, chips, servers, and networking gear in advance of when we can monetize it. Typically six to 24 months before we start building customers depending on the component. However, these capex investments fund assets with many year useful lives. 30 plus years for data centers, five to six years for chips, servers, and networking gear. The free cash flow and ROIC for these investments are cumulatively quite attractive a couple years after being in service. However, in times of very high growth like now where the capex growth meaningfully outpaces the revenue growth, the early years free cash flow is challenged until these initial tranches of capacity are being monetized and revenue growth outpaces capex growth. We've been through this cycle with the first big AWS growth wave and like the results. We expect to feel similarly about this next wave with much larger potential downstream revenue and free cash flow.

I'll now turn to stores. Units grew 15% year-over-year, the highest we've seen since the tail end of COVID lockdowns. We continued expanding selection, including more than 600 new notable brands. Our grocery business continues to grow quickly across both perishables and non-perishables. And with more than $150 billion in gross sales in 2025, we're now the second largest grocer in the US. We offer perishables delivered same day alongside millions of other items in more than 2,300 cities and towns across the US with more to come. Prime members are loving the convenience of getting fresh groceries alongside other products they're buying on Amazon. And perishable sales have grown over 40 times year-over-year and make up nine of the top 10 most ordered items for same day delivery where the service is available. Customers shopping same-day perishables build larger baskets, adding nearly three times as many items to their order and spend over 80% more than customers who don't. Whole Foods Market also continues to accelerate with over 550 stores today and 100 more coming in the next few years.

We remain committed to meeting or beating other retailers on price. And in Q1, the average prices of products offered on Amazon.com decreased compared to the same period last year. Prime Day will take place in most countries in June, which will bring Prime members even more savings across every category. We continue to find new ways to speed up delivery for customers in both cities and rural areas. We offer millions of items available for same day delivery with Prime, up to 40 times the selection of a typical big box retail store. And we've delivered more than 1 billion items same day overnight so far this year. We're also making delivery even faster, recently announcing one and three-hour delivery options on over 90,000 items with 1-hour delivery available in hundreds of cities and towns, three-hour delivery in 2,000 plus cities and towns, and more on the way. And we continued to expand our ultra fast delivery service Amazon Now, which offers delivery in 30 minutes or less on thousands of items. It started last year in India where orders are increasing 25% month over month with members tripling their shopping frequency once they start using it. The service is now available to tens of millions of customers across nine countries with more to come as well.

The stores team also continues to innovate and deliver for customers with AI. We launched Health AI, a 24/7 AI-powered personal health agent backed by One Medical clinicians that gives customers instant clinical guidance and takes action with their permission from booking appointments to managing prescriptions to facilitating medical treatment with a real One Medical provider. Rufus, our agentic AI shopping assistant, continues to resonate with customers. Rufus can research products, track prices, and auto-buy products in our store when they reach a set price. Monthly active users are up over 115% and engagement is up nearly 400% year-over-year. And we recently introduced a new AI experience for sellers in Seller Central that dynamically generates a custom personalized visualization of data, key insights, and scenarios tailored to the seller's goals. It's early, but the initial response and feedback are very strong.

Moving on to Amazon Ads. We continue working to be the best place for brands of all sizes to grow their businesses, and we're pleased with the continued strong growth across our full-funnel offerings, generating $17.2 billion of revenue in the quarter and up 22% year-over-year. Forrester recently recognized Amazon Ads as a leader in omnichannel advertising platforms with unmatched supply and insights for connected TV and commerce media. We deepened our Netflix partnership with Amazon Audiences, which enables advertisers to apply Amazon's exclusive signals from shopping, browsing, and streaming to Netflix's highly engaged viewers to reach the right audiences and drive even stronger performance. We also partnered with Comcast Advertising to expand local advertising to thousands of brands and expanded interactive video ad capabilities to partners starting with Samsung TVs. Our ads team also continues to invent and deliver for advertisers with AI. For example, we expanded Creative Agent, an agentic partner that plans and executes the entire ad creative process, to Canada, France, Germany, India, Italy, Spain, and the UK. And we recently introduced sponsored product and brand prompts in Rufus that help brands showcase products and customers make more informed buying decisions. It's early but we're seeing nearly 20% of shoppers who interact with a brand prompt in Rufus continue the conversation about that brand.

We're also continuing to invent and see momentum in several other areas. I'll mention a few starting with entertainment. Movie goers have flocked to Project Hail Mary with nearly $615 million in global box office to date. Its opening weekend was the second biggest for any non-sequel non-franchise film in the last decade. We also surpassed 100 million viewers globally for the Culpables movie trilogy with all three films reaching number one in more than 170 countries at launch. In live sports, we offered exclusive coverage of the NBA SoFi play-in tournament with total viewership up 18% compared to last year on cable. Alexa Plus early access expanded to millions more Prime members in Mexico, the UK, Italy, and Spain. Customers are loving Alexa Plus, talking to Alexa twice as much and for longer durations across a wider breadth of topics, completing purchases on devices three times more, streaming music 25% more, and using smart home functionality 50% more than Alexa Classic.

Zoox has now driven nearly 2 million miles and carried more than 350,000 riders, is available to the public in Las Vegas and San Francisco, and is testing in eight other cities. We recently announced that Zoox will be available through the Uber app in Las Vegas and in Los Angeles in the future. And finally, Amazon LEO continues gaining momentum with commercial service on track to launch in a few months. We already have meaningful revenue commitments from enterprises and governments including Delta Airlines, JetBlue, AT&T, Vodafone, DirecTV Latin America, Australia's national broadband network, DP World Tour, NASA and others. We also announced that we plan to acquire Global Star, which will expand LEO's satellite network with direct device capabilities. And we entered an agreement with Apple for Amazon LEO to power satellite services for iPhones and Apple watches. We're in the middle of some of the biggest inflections of our lifetime. And Amazon has the culture, the know-how, and the resources to make so many customers' lives better and easier and to build multiple new long-term businesses with substantial return on invested capital and free cash flow. We will continue investing and inventing to make it so. With that, I'll turn it over to Brian.

Thanks, Andy. Let's start with our topline financial results. Worldwide revenue is $181.5 billion, a 15% increase year-over-year, excluding the 180 basis point favorable impact of foreign exchange. Worldwide operating income was $23.9 billion with an operating margin of 13.1%, our highest operating margin ever. Across all segments, we continue to innovate for customers while operating more efficiently. In the North America segment, first quarter revenue was $104.1 billion, an increase of 12% year-over-year. International segment revenue was $39.8 billion, an increase of 11% year-over-year, excluding the impact of foreign exchange.

Our seasonal shopping events performed well in Q1, including our big spring sale. We also saw particularly strong performance with third-party sellers who are important contributors to our broad selection and competitive pricing. Our sellers saw strong sales growth in Q1, particularly in the US as well as in Europe and Brazil, where we've recently lowered seller fees. We're seeing our investments in the seller experience resonate and in turn grow our business. Prime continues to fuel our growth and reflects the value members receive from the program. Prime Video is a key pillar of the Prime value proposition and an important driver of new member acquisition. Our investments in original and exclusive content and live sports combined with our third-party partner titles offer the best selection of premium video content. In addition to delivering compelling value to Prime members, advertisers, and partners, Prime Video is now a large and profitable business in its own right.

Now let's shift to segment profitability. North America segment operating income was $8.3 billion with an operating margin of 7.9%. International segment operating income was $1.4 billion with an operating margin of 3.6%. We are pleased with the fulfillment network performance in Q1. The team has worked hard to optimize our network. Overall unit growth of 15% continues to outpace our cost to operate the fulfillment network as outbound shipping costs grew 12% year-over-year and fulfillment expense grew 9% year-over-year both on an FX neutral basis. As our network efficiency improves, we're able to deliver items faster and improve the customer experience while at the same time lowering our cost to serve.

Looking ahead, we see meaningful opportunities to further enhance productivity across our global fulfillment network, all while continuing to raise the bar on delivery speed. We will keep optimizing inventory placement to shorten distance traveled, reduce touches per package, and improve consolidation rates. Alongside these efforts, we deploy robotics and automation, which have been integral to our operations for decades. Our latest generation technologies offer a step change in efficiency which we're deploying in both new and existing facilities. All of our US large format fulfillment center launches in 2026 will have this latest generation technology. We're seeing early positive results with improved site safety, higher productivity, and lower cost to serve.

Moving to our AWS segment, revenue is $37.6 billion and growth accelerated 480 basis points to 28% year-over-year driven by both core and AI services. We continue to see customers increase cloud migrations and scale their use of AWS core services. Customers seeking the full benefit of AI are accelerating their transition to the cloud. We also see a strong correlation between AI spend and core growth. As customers spend more on AI, we see a corresponding demand increase in core. We expect this to increase over time as customers move more AI workloads into production, strengthening demand for our core services. Our AI revenue is growing triple digits year-over-year. We're bringing more capacity online to meet high customer demand while also driving meaningful efficiency gains across our installed base. Our AI offerings continue to gain traction with customers and Bedrock has been a significant growth driver. In 2025, we delivered 4x improvements in Trainium 2's token throughput since the majority of Bedrock's workloads run on Trainium. These efficiency gains directly translate into more capacity to serve customers.

AWS operating income was $14.2 billion and reflects our strong growth coupled with our focus on driving efficiencies across the business. Now turning to total company capital expenditures. Our cash capex is $43.2 billion in Q1. This primarily relates to AWS and generative AI. As we invest to support strong customer demand, we'll continue to make significant investments, especially in AI, as we believe it to be a massive opportunity with the potential to drive long-term revenue and free cash flow.

I'll finish with our financial guidance for Q2. The following guidance assumes that Prime Day occurs in the second quarter in most of our largest geographies, including the US, and that Prime Day occurs in the third quarter in Australia, Brazil, India, and Japan. Note that in 2025, Prime Day was in Q3 for all countries. Q2 net sales are expected to be between $194 billion and $199 billion. We estimate the year-over-year impact of changes in foreign exchange rates based on current rates, which we expect to be a headwind of approximately 10 basis points in the quarter. Q2 operating income is expected to be between $20 billion and $24 billion. We continue to see strong sales trends carrying into Q2. And I'll mention a few items on the operating income guidance. First, this estimate includes the impact of our seasonal step up in stock-based compensation expense in Q2 driven by the timing of our annual compensation cycle. Second, within the North America segment, we do expect a year-over-year cost increase of approximately $1 billion related to Amazon LEO as we manufacture and launch more satellites in preparation for our service offering. Amazon LEO's commercial service is on track to launch in Q3, and we expect to begin capitalizing certain costs in Q4, including production and launch costs. Third, our guidance anticipates higher

Transportation costs related to fuel inflation, which is partially offset by the recently implemented fuel and logistics related FBA search charge. I'm thankful to our teams across the company for their hard work and dedication to customers. We remain focused on driving an even better customer experience, which is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.

Thank you. At this time, we will now open the call up for questions. We ask each caller to please limit yourself to one question. Thank you. If you would like to ask a question, please press star one on your keypad. We ask that when you pose your question, you pick up your handsets to provide optimum sound quality. Once again, to initiate a question, please press star then one on your touchtone telephone at this time. Please hold while we pull for questions.

And the first question comes from the line of Eric Sheridan with Goldman Sachs. Please proceed with your question.

Thanks so much for taking the question. Um, you know, Andy, across an array of announcements you've made recently with AWS and reflecting upon what you wrote in the shareholder letter, can you talk a little bit about the needed levels of investment over the next couple years to scale compute and capacity to meet your current state of revenue backlog and how we should be thinking about your unique approach to custom silicon and AI infrastructure that maybe positions you competitively to build that scale? Thanks so much.

Yeah. Well, we to your point, Eric, we've made a lot of announcements over the last several months, and we're really pleased with the growth that we're seeing in AWS right now. You know, 28% year-over-year, fastest growth rate in 15 quarters for us. Haven't grown at this pace since we were about half the size. And growing 28% on a $150 billion annual run rate basis is not simple to do. And I think there's a few things around it. You know, first is just we continue to see people choosing AWS for AI. In part because of our really broad full stack functionality, in part because people want their inference as they scale it to be close to their data and their applications. So much more of it lives in AWS and elsewhere. And in part because we have the strongest security and operational performance. And that's just you can see it in our numbers. It's leading to very substantial AI growth. And then at the same time we're seeing very significant growth in our core business and some of that are the migrations that have picked up from enterprises from on premises to the cloud but a lot of that is also as AI growth is exploding it turns out that it leads to a lot of core growth as well you know all the post-training all the reinforcement learning all the agentic actions and tool usage that these agents are using. And it fits with what you're asking about on the chip side, which is because we have an unusual collection of chips. We have the leading CPU chip in Graviton and we have the leading price performance silicon AI chip in Trainium. It means that we're really unusually well positioned for the inflection that we're seeing and the type of growth that we're experiencing. And so, you know, we I don't have an update on a new update on capital. Our plan is largely the same, but we we do view this as truly a once-in-a-lifetime opportunity where every application that we know of is going to be reinvented. And there are so many new applications that none of us have ever imagined or dreamed we could build that are starting to be built and will be built. And all of that is going to be built on top of AI with a lot of consumption of CPUs and core as well. So I think we I expect that we we will invest a significant amount of capital over the coming years to pursue that opportunity and that our customers, our shareholders and Amazon in general are going to be much better off down the road because we did so.

And the next question comes from the line of Brian Novak with Morgan Stanley. Please proceed with your question.

Great. Thanks for taking my questions. I have two. Um one just on the accounting side. I we'll probably get it in the cube, but can you just give us an update on what the the AWS backlog looks like and sort of any any visibility on the the breadth of that backlog beyond the big labs? That's the first one. And then the second one, as you sort of think about milestones for for Rufus and Agentic Commerce for you in 2026, what are what are you most focused on making sure you accomplish on the Agentic side this year just to make sure you stay at the knife's edge of the Agentic Commerce offerings? Thanks.

Yeah, on the backlog, the the backlog for Q1 is $364 billion. That does not include the recent deal that we announced with Anthropic for over hundred billion. There's reasonable breadth in that as well. It's not just one customer or two customers. On the Agentic Commerce milestone question, you know, we are very bullish on what Agentic Commerce will look like. I think it's going to be very good for customers in the long term. I think it'll be good for us, too. And you can see some of that focus from us in and what we're building with Rufus. If you haven't checked out Rufus in a while, it's really substantially improved over the last year and we have a lot of customers using it. As I mentioned earlier, you know, the you see the monthly active users up over 115% in Rufus and the engagement up over 400% year-over-year. And you know I think while while I think there will be we'll do a lot of work with third-party horizontal agents to try and make that customer experience better. And by the way I do think today it reminds me in some ways the stage we're in of what we saw in the early days of search engines and they're trying to refer business to e-commerce. You know, it's it's it's never been a giant part of the referrals to our e-commerce business, but over the years the experience got better. And what you see with Agentic Commerce is it's a small fraction of what we see with the search engine referrals, but the experience just hasn't gotten great with these third-party horizontal agents yet. They they they're not often able to get the pricing right or the product information right. They don't have any personalization data or any shopping history. And so we we do want to see that get better with third party horizontal agents. We're having conversations with all those folks to try and make that better and find something that works for customers and all the companies. And then it'll be interesting over time which agents customers choose to use. I happen to think that if you're going to a particular retailer that you you like to do business with and you like to shop from, if they have a great agentic shopping assistant, you're going to often start there because it's where you're doing your shopping. It's easier to kind of get the information. They have better information about what other customers like you are buying. You can you can make all sorts of changes to how your account and your shipping information is working there. And so, you know, that's what we're aiming to make Rufus be is we're we're aiming to have it be the best shopping assistant anywhere. And I think we're on that path.

Thank you. The next question comes from the line of Justin Post with Bank of America. Please proceed with your question.

Thank you. I'd like to ask two, one on models and then one on premium chips. So on models, it looks like you might have access to the full suite of OpenAI models on Bedrock. Just wondering how how big of an unlock that is and and how how focused maybe you are on on your own Nova model. And then second, shareholder letter mentioned you might be able to sell racks of of Trainium. Just wondering, you know, with your capacity constraints, how you think about timing of that and how big of an opportunity? Thank you.

Yeah, on the models question, I think the fact that we're going to have all the OpenAI models available in Bedrock is a big deal. It's a big deal for customers and you know we we have we obviously have a very large amount of AI being done in Bedrock today on the models we have and this is Anthropic and Llama and and Mistral and you know a host of others but the one thing you learn over and over again with every technology was true in databases was true in analytics was true in models it's true in chips too by the way is that customers want choice. There is not one tool to rule the world and they want choice and each of the models are better at some things than than the other models. And so people for a long time have wanted to consume OpenAI models in Bedrock. You know we just enabled yesterday the the stateless model the 5.4 model and will enable the the most recent 5.5 model in the next couple weeks and you know most of the model work and most of the AI has been done in these stateless models you know kind of tokens in and tokens out and while I think there will continue to be lots of work done that way I think the future of using these models is a stateful model stateful API and that's because when you're building agents you're building AI applications you don't want to start a new every time you interact with the model you want to store state you want to store you know you want to store identity you want to store what the conversation or the actions have been you want to reach out and do a little bit of compute here you want to have the tools be able to reach you know the models reach out to the different tools to accomplish different tasks and it only happens if you're able to store state and so the Bedrock managed agents that we collaborated with invented with OpenAI that we just launched the preview of yesterday is also I think that's the future of how these agents are going to be built. It's something that nobody else has and I think it's very exciting to our customers and of course we'll have you know other models like Cohere and things like that as well. So I I think it's a big deal for customers and I think it's going to be good for our business as well. On the question about Trainium and the notion of our selling racks over time. I do think that's very much a possibility. You know always we have to balance we have such demand right now for Trainium and we have such demand from from various companies who will consume as much as we make that we have to decide how much we're going to allocate to the existing demand and customers. How much we're going to save to sell as racks and and for our existing customers that we sell Trainium to, how many will be Trainium Plus running on our cloud infrastructure versus just the chips themselves. But I expect over time there's a good chance we're going to sell racks over the next couple years.

And the next question comes from the line of Rob Sanderson with Loop Capital Markets. Please proceed with your question.

Yeah, thank you. Good afternoon and thanks for taking the question. Um I wanted to ask a little bit about Amazon Kuiper. Um can you maybe help dimensionalize some of the you know the revenue opportunity in the consumer and in the enterprise space over the next few years? What are the governors on the ramp? Um could you talk about types of new services that you will be able to develop with the Global Star infrastructure and the spectrum that maybe you couldn't address before or would take you you can get to more more quickly now. And and then you know how expansive is the longer term vision? you know, I know you're just beginning to launch commercial services, but you know, over the long term, do you do you expect to include, you know, non-communication services like orbital data centers or or things like that as as this becomes feasible in the, you know, in the decade ahead?

Yeah, I I I'll try and address as many of those questions as I can. You know, I am very bullish about Amazon Kuiper and the opportunity there. There are billions of people around the world who do not have access to broadband connectivity. And there are many thousands of businesses and government assets that just they that people don't have visibility to because they don't have the right connectivity. And it means that those those entities can't do a lot of the things that we all take for granted today, including, you know, education online, business online, shopping or or entertainment online, having constant visibility and digital twins. There's all these things that they can't do today. And so, we think that Amazon Kuiper is going to help solve that problem. I think when we launch our our service commercially and we've got, you know, we just had another launch this week, so we have over 250 satellites in space. When we launch that service commercially, it will be one of two offerings that are on the the current technology edge. And I think that we will have a meaningful advantage in performance. I think will be about two times better on the downlink than existing alternatives and about six times better on the uplink performance than existing alternatives. I think we'll we'll have a cost advantage for customers. And then for the governments and the enterprises and we talked to a lot of them and we have already signed agreements with many of them even though we haven't launched the service commercially. You know the latest of which was was with Delta Airlines committing at least half of their fleet starting in 2028. But when you talk to them, another really big part of what matters to them is they're going to want to take this data off of the satellite constellation and they're going to want to store it in the cloud and they're going to want to do analytics on it and they're going to want to do AI on it and just the combination of Kuiper with the leading cloud in the world in AWS is very compelling to enterprises and to government. So you know I think the our only you know today if you ask what stops us from growing the business we we have to get the constellation into space. We have over 20 launches planned this year. We have over 30 launches planned in 2027. But I think the business has a chance to be a very large you know, many billion dollar revenue business. And I think it has some characteristics that are reminiscent of AWS in that it's capital intensive upfront where you're you're you're committing a lot of capital and cash in the early years for assets that you get to leverage over a long period of time. And so I I like the free cash flow and return on invested capital characteristics of that business in the medium to long term. You know, and the last thing I'll say about it is, you know, your question about Global Star, you know, increasingly what we're finding with with consumers and enterprise and governments is that they don't like to have any periods where they don't have connectivity. It just upsets whatever customer experience they they're going through. Even in metropolitan areas, we all hit certain parts of the highway where, you know, or or certain roads where you can't get connectivity or you're hiking, you're skiing. And so, increasingly, we see very large demand for for consumers to have direct to device. And that was really the impetus for our acquisition of Global Star. They have unusual and scarce global spectrum that's required to provide direct to device. We also really like the satellite know-how that we'll get as part of that merger with with Global Star. And then it also afforded us the opportunity to build a deep relationship with Apple who's going to use our direct to device for their iPhones and for their watches. So very optimistic about the business.

And the next question comes from the line of Shweta Kajura with Wolfe Research. Please proceed with your question.

Okay, thanks a lot for taking my questions. Um, wonder Andy if you could please talk about, you know, how you're thinking about the increase in price for memory and storage and just the supply chain inflation we're seeing and the impact it could have and capex this year and potentially next year as well. And then on agentic commerce, if you could talk about how you view the opportunity with advertising. I have no doubt that Rufus could be the best shopping assistant available over time but for advertising opportunity how do you view that if agents would be the ones taking action to shop? Thanks a lot.

So on memory and storage and the supply chain I think everybody knows that the cost of these components particularly memory has skyrocketed and we're just in a stage where there's just not enough capacity for the amount of demand. We have worked very closely with our strategic partners. We saw this trend happening early in the kind of the middle of the latter part of last year and we've worked with our strategic suppliers here to get a significant amount of supply and so we're working very closely with them. I think the team's been very scrappy. I think we've done a good job in making sure that we're not capacity constrained there but we watch that very closely. You know, one of the interesting things that we see right now with the change in price and in supply on things like memory is that it is a further impetus pushing companies who have on premises infrastructure into the cloud. And it's because in meaningful part these suppliers are prioritizing their very largest customers which cloud providers are. And so we have seen a number of conversations we've been having with enterprises for many months where it's just been slower in getting the transformation plan to move to the cloud accelerate rapidly just because we have a lot more supply than what others have. So be interesting to see how that evolves over time. It could have we're we're doing our best to kind of to to have the supply we need and keep the cost in the right spot. But we'll see how that continues to evolve. And I think on the agentic commerce and how that impacts advertising, you I actually believe that we're going to we're going to like this for advertising. I think it's going to be good for customers and it's going to be good for our business. And I think first of all the first thing to remember is the way that our ads team has built tools and agents themselves is making it so much easier to do advertising. You know, if you look at small and medium-sized businesses that had to take, you know, weeks and months to do creative and to pick the right audience, all of that is just it's so much faster and so much easier because of our advertising agentic tools and you no longer have to take as much time or spend as much money building the creative. So, I think they're going to be a lot more advertising advertisers with the rise of what's happening in AI. And then if if you look at the agentic commerce experiences, you look at any of these agentic experiences, they tend to be multi-turn conversations where you're not interacting with one search and getting an answer. You you tend to find that you're asking questions, you're narrowing questions, it's asking you questions on what you want. And you know, in that process of having multi-turns, there are multiple opportunities to surface relevant products to customers. you know, many of which will be organic and some of which will be sponsored. And you know, and it also gives rise to opportunities like sponsored prompts. And so, one of the interesting things that has been very successful for customers in our store has been when they ask certain questions, we give them a number of suggestions that are that are all created through AI. And we have we you know we've gotten pretty good at also having sponsored prompts and that mix of questions and prompts that make it easy for people to keep digging deeper into what they're interested in. So I actually believe that that advertising will do well in a world of agent commerce.

Thank you. And our final question comes from the line of Colin Sebastian with Baird. Please proceed with your question.

Uh, thanks very much. Good afternoon. Maybe a two-parter if I could. Um, Andy, first off, just wondering where you're seeing in terms of the trend between incremental AI demand from earlier adopters and and larger AWS customers versus maybe how the demand curve is is shaping up across the broader enterprise base. And then at a high level, if you think about the use of AI internally across Amazon's businesses, presumably the business overall looks very different in three or four years. Maybe maybe Andy, if you could contextualize where you see the most opportunity for the technology internally, both in terms of product as well as maybe driving more operating efficiency. I think I think that would be helpful. Thank you.

Yeah. So on the on what we see in the incremental AI demand from early adopters versus broader enterprise base, you there's I think it's no secret that you've got you know the AI labs are spending an incredible amount of money on compute at this point and and compute both on the AI side as well as on the core side and the models that they're building and the the the companies that have successful generative AI applications are certainly spending a lot and there you know there's several of those labs but we also see quite a bit of enterprise adoption and usage of AI you know as I've said before the the largest absolute place that we see enterprises having success as in projects that are you know around cost avoidance and productivities. These are things like automating customer service or business process automation or fraud or things of that sort. But the number of projects that we're working with across enterprises and that we're now starting to see come to production around brand new experiences trying to figure out how to reinvent their current experiences but using inference and AI to be smarter also very significant. So we're we're seeing the adoption of both of those segments. On the use of AI internally for our our current businesses. I I think that you know the shortest first summary I could give you Colin is that I do not see a place in any of our businesses or any of the ways that we do work where we're not going to have giant impact on what we do. You know, I think you know, I've I've long had this belief that while you can add incrementally to a lot of your existing customer experiences, different agentic and AI experiences, I really believe that you know that in the in the fullness of time and I don't know if that's three years from now or five years from now or or it could be sooner too that all these customer experiences we knew we know are going to be completely reinvented. And they're going to have different interfaces. They're going to have different ways that people interact with them. They're going to people are going to want to have dialogue with them. And so I think it means that you have to look, you know, it's tricky for if you have an existing business that's doing well, but you have to look at every single one of your customer experiences and you have to be able to carve off resource for that team to think anew about what would the future customer experience look like if you started from scratch today. and if you had all the technologies like AI available to you when you started and that is what we're doing in every single one of our experiences and if I you know I have a chance to be involved in some of those and there it's really exciting and you know there there are experiences that may take a while to for customers to to get used to and to use over time and you might find different segments like those AI forward experiences more than others early on but if you're not actually working on inventing those right now. I think it's going to be very hard to to have the business and the experience leadership that that we want over a long period of time. So, every single one of our consumer businesses, every single one of our businesses general is working on that. And then I would say internally, I also think that it's going to radically change how we work. It already is. I mean, just look at look at how coding, agentic coding is changing how we're all building products. I think it's going to have a comparable impact on how we do DevOps and how we do customer service how we do research, how we do analytics, you know how sales is conducted. I think every single one of these functions that we all do at work are going to very significantly change and that's another area of of real focus for us. And you know we have this experience I mentioned in my letter. But you know if you look at one of our services we swapped out the engine of the service while we were you know also running the service full tilt. And normally that would have taken 40 or 50 people about a year to do and we we took five really smart people AI forward thinking people building on agentic coding tools and those five people rebuilt it in 65 days. like that. That is a very different world of operating and that's the world I think we're heading to over the next few years.

Thanks for joining us on the call today and for your questions. A replay will be available on our investor relations website for at least three months. We appreciate your interest in Amazon and look forward to talking with you again next quarter.