CEO Andy Jassy’s 2023 Letter to Shareholders

🌈 Abstract

The article is a letter from Amazon's CEO, Andy Jassy, to shareholders, providing an overview of Amazon's performance and key initiatives in 2023. It covers the company's financial results, customer experience improvements, progress in various business segments (Stores, Advertising, AWS, Prime Video, Project Kuiper), and Amazon's approach to building "primitives" as a foundation for rapid innovation.

🙋 Q&A

[01] Overview of 2023 Performance

1. What were the key financial highlights for Amazon in 2023?

• Total revenue grew 12% year-over-year to $575 billion
• North America revenue increased 12% to $353 billion
• International revenue grew 11% to $131 billion
• AWS revenue increased 13% to $91 billion
• Operating income improved 201% to $36.9 billion (6.4% operating margin)
• Free Cash Flow adjusted for equipment finance leases improved from -$12.8 billion to $35.5 billion

2. What were the key customer experience improvements across Amazon's businesses?

• Stores business saw enthusiastic customer response to focus on selection, price, and convenience
• Delivered a record number of same-day and next-day items to Prime members
• Reduced cost to serve per unit globally, including over $0.45 per unit reduction in the U.S.
• International businesses, including emerging markets, showed progress and profitability

3. What were the key highlights in Amazon's Advertising and AWS businesses?

• Advertising revenue grew 24% to $47 billion, driven by sponsored ads and new streaming TV advertising offerings
• AWS saw substantial cost optimization by helping customers use the cloud more efficiently, but saw renewed growth by the end of 2023
• AWS expanded its infrastructure, chip offerings, and generative AI capabilities

[02] Amazon's Approach to Innovation

1. How does Amazon approach building "primitives" as a foundation for innovation?

• Primitives are discrete, foundational building blocks that allow developers and builders to rapidly innovate
• Examples include AWS services like S3 and EC2, as well as logistics and fulfillment capabilities in Amazon's Stores business
• Building primitives, rather than tightly coupled components, enables faster innovation and experimentation

2. How is Amazon applying the primitives approach to Generative AI (GenAI)?

• Amazon is investing in three layers of the GenAI stack:
  1. Compute and software to build foundation models
  2. Managed services to leverage existing models and build GenAI applications
  3. GenAI applications across Amazon's consumer and AWS businesses
• These GenAI primitives are intended to empower both internal and external builders to transform customer experiences

3. What are some of the key long-term opportunities and challenges that Amazon sees ahead?

• Significant growth opportunities in areas like physical retail, cloud computing, media/advertising, and global connectivity
• Challenges include aggressive competition, execution risks, and the need for continued large investments