AWS cannot become true hypergrowth by staying on parent Amazon’s slow train
Lots of excitement about Amazon’s recent earnings report last week. The stock gained 13.5% on Friday.
And certainly, its good to see the AWS business accelerating to 40%YOY in Q42021.
However it is important to note that with the exception of AWS and Physical store sales, every other business line of the parent company has been slowing down and becoming less profitable along the way.
Top line and bottom line deceleration because competitors like Walmart and Target are capturing bigger shopping cart sales from local residents by offering free home delivery, same-day delivery and convenient pick-up-from-the-store-parking-lot services.
AWS will have to increasingly shoulder the weight of its sibling retail business lines.
First lets look at some revenue numbers
Net Sales ($M)
Q32020 Q42020 Q12021 Q22021 Q32021 Q42021
Online stores $48,350 $66,451 $52,901 $53,157 $49,942 $66,075
YoY% excl. f/x 37% 43% 41% 13% 3% 1%
Physical stores $3,788 $4,022 $3,920 $4,198 $4,269 $4,688
YoY% excl. f/x (10)% (7)% (16)% 10% 12% 16%
Third-party seller serv. $20,436 $27,327 $23,709 $25,085 $24,252 $30,320
YoY% excl. f/x 53% 54% 60% 34% 18% 12%
Subscription services $6,572 $7,061 $7,580 $7,917 $8,148 $8,123
YoY% excl. f/x 32% 34% 34% 28% 23% 16%
Advertising services $4,982 $7,350 $6,381 $7,451 $7,612 $9,716
YoY% excl. f/x 52% 66%. 76%. 88%. 52% 33%
AWS $11,601 $12,742 $13,503 $14,809 $16,110 $17,780
YoY% excl. f/x 29% 28% 32% 37% 39% 40%
Other $416 $602 $524 $463 $479 $710
YoY% excl. f/x 18% 42% 49% 34% 15% 19%
And now lets look at profitability
Q32020 Q42020 Q12021 Q22021 Q32021 Q42021
North America
Operating income $2,252 $2,946 $3,450 $3,147 $880 $(206)
YoY% excl. f/x 76% 55% 162% 45% (62)% (108)%
Operating margin 3.8% 3.9% 5.4% 4.7% 1.3% (0.2)%
International
Operating income $407 $363 $1,252 $362 $(911) $(1,627)
YoY% excl. f/x N/A N/A 347% (53)% (330)% (533)%
Operating margin 1.6% 1.0% 4.1% 1.2% (3.1)% (4.4)%
AWS Segment
Operating income $3,535 $3,564 $4,163 $4,193 $4,883 $5,293
YoY% excl. f/x 57% 41% 41% 32% 40% 46%
Operating margin 30.5% 28.0% 30.8% 28.3% 30.3% 29.8%
If you want to dig further, look up their cash flow numbers in the earnings report. Same story - declining numbers and YOY% comparisons.
If I want to own a retailer, I might be better off buying TGT or WMT.
If I want to own a cloud company, I will skip AMZN. I prefer and am long pure-plays like DDOG, CRWD, S, NET.
Beachman https://twitter.com/Iwannabeontheb2