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Welcome to the Jason and Scott Show. This is episode 338 being recorded on Friday, May 1st, 2026.

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I’m your host, Jason Retail Geek Goldberg. And as usual, I’m here with your co-host, Scott Wingo.

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Hey, Jason, and welcome back. Jason and Scott Show listeners.

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Jason, shop talk was weird. It was, what’s the Disney movie where they trade bodies and stuff?

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I felt like that was it you know how you’re always yeah freaky friday

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that’s right wacky wednesday freaky friday it’s all

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the same we’re recording this on a friday so that’s good because you

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always say there was a period of five years i didn’t

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go to shows and you’re like all everyone does is ask me where

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you are it’s getting kind of old that was my

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role at shop talk so everyone’s like where’s jason oh my god where is he you

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guys are never together and i had to break the news that you were on spring

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break so hopefully hopefully you had fun hopefully your sunscreen that you introduced

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us to you at NRF held up and all the, all the fun was had on your spring break.

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We, we missed you at shop talk, but it was really, it was more show for me because

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it was all about agentic commerce.

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Yeah. Yeah. Uh, the, I, I was grateful for you and everyone else keeping me abreast.

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Cause I did, I did have some FOMO and I’m glad you didn’t find out that all

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those people that were asking you where I was were paid actors I hired to, to hound you.

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Yeah. Yeah. Or maybe you just double paid them to like make you know kind of

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like prove a point we’ll never know.

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Yeah yeah mysteries of the of the earth and i like how you went freaky friday

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i was thinking more like stranger things upside down world but okay okay.

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Yeah a little scarier don’t we want to keep this super g-rated so no pg themes here on our pockets.

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Yeah although there’s an animated version of stranger things that i am now watching with my son so.

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Give me a spoiler-free thumbs up, thumbs sideways, thumb down.

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Thumbs up? It’s, I didn’t, I was, the concept is between season two and season

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three of the TV show, there was a gap.

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There was a gap year, which I’d forgotten about. And so this is an animated

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series that fills in the gap year.

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And so it jumps right in. Like, it was a little abrupt for my son because he

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didn’t, you know, know who Eleven was, for example.

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But um yeah but he caught up and he’s toy into it and it’s because it’s animated

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it’s slightly less scary i would argue the first couple seasons of stranger

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things were probably okay but it started to get like a little more intense yeah.

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The first season oh okay i don’t want to have spoilers but.

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There’s yeah the.

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First season freaked my daughter out.

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Okay probably.

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She was probably older at that point than your son is now so,

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the the running down and getting in the elevator scene do you remember that

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i do yeah now yeah fair yeah yeah jump jump scares.

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Still get to him sometimes so.

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Yes so that one uh you may want to fast forward yeah well.

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We’re gonna stick with the animated series for now okay.

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So that was good and i don’t know where you’re going next but i’m on my way

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next week to the vendor sauceify this is over on the branded manufacturer side. They’re a PIM.

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They hate to be called a PIM, but everyone calls them a PIM.

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They do a show called Digital Shelf Summit. So I’m speaking there and I’ll see

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a lot of our favorite folks.

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Kerry is going to be there. Scott Omsman from the Amazon world.

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And yeah, I’m really looking forward to that. That’ll be a lot of fun.

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And I’m going to do a, I’m going to attempt a workshop where in real time,

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I analyze people’s agendic commerce strategy.

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So let’s see. It’ll either be wildly entertaining or a train wreck,

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in which case it’ll also be entertaining for everyone but me.

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So, yeah, we’ll see how that goes.

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So I have been to that show before, so that is great. And I’m picturing,

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I have this really fond flashback.

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Back in the old days of e-commerce, I used to do these live SEO audits and live usability audits.

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And so people in the audience would really raise their hand and yell out their

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URL. And we like on stage in front of everyone would like dive into their checkout

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flow and talk about all the friction.

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So I’m much more modern than that. The spiritual successor.

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Is this all going to be like you winging it or are you using any automated tools?

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Does RefiBuy have some cool tools you’re going to apply to this?

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I can use our, so we have, we can scan your product page and like figure out

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what you need to do at that layer. we have a bot detection system.

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Yep.

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Other than that, some of the things we, we can do all these things in an automated

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way, but they’re not real time.

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They kind of lazily go about doing things. So it won’t work for a show.

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So I will be doing some of it real time.

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Got it. So humble brag, I vibe coded a Microsoft Edge plugin that loads the

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page with the parameters that the LLM bots load it with.

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And it’s not like super deep dive, but it does a quick thing to like,

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how big a file is it getting and what content is blocked and stuff like that.

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It’s super interesting to even see what sites let the bots in and what don’t.

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Yeah, very cool. You can kind of change the, what is that thing called?

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The agent.

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User parameter. Yeah. And yeah.

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Yeah.

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Good stuff.

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All right. Awesome. Well, I will not be going there, but I will be eager to hear how it is.

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I did a public event for Pubisys last week. We have a big healthcare division, and so I did…

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Pubisys Healthfront, which is for all the medical and pharmaceutical clients.

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And a very agentic forward conference, by the way, because that’s an industry

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where you used to trust the white coats and now you trust the robot to give you medical advice.

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And I did the retail panel. So I had John Halverson, who’s the CMO of Kenview,

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which makes Tylenol and Zyrtec and others, and the head of merchandising at CVS who, fun fact, they,

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for the first year of this year, the merchandise in every single CVS is a custom

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planogram store by store that was done agentically.

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So they’ve gone from kind of a regional model where they pick products and all

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the same products go to every store in a region to a model where the robot picks

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the product assortment for every, every store, which is cool.

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So yeah so i did that last week and then i got a bunch of private

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events coming up this week with some super awesome

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clients so i’ll be looking forward to doing those events i can’t disclose who

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they are and then i’ll be in florida in a couple weeks for the latin summit

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which is a cool show about how to win latin customers here in the u.s but also

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how to how to win in the in latin american markets cool.

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We got to learn all spanish for that one are you gonna.

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No though i’ll just use a google translate to live live simulcast me oh.

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Neat that’ll be interesting.

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Yeah let’s.

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Hope it doesn’t throw anything weird in there.

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Yeah that’s of course not true uh but it

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does it does remind me of it like i do some things

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in brazil occasionally and i showed up at a big event in brazil and the translators

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were waiting for me as i walked into the rehearsal and they met me at the door

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and they’re like you’re jason goldberg huh and i’m like yeah and they’re like

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we’ve been watching your videos on YouTube, you’re going to be a problem.

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Apparently Portuguese is a slow language that it takes a little longer to say

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things than it does in English. And I say a lot of things fast.

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So, yeah. And then are you already? Oh, go ahead.

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I was going to, I don’t know if you’re through with your update,

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but I was curious what you think about Amazon moving Prime Day this year.

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Is that going to mess up all your data?

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Yeah, so it is a data problem. So for folks that aren’t in the know,

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I want to say 2021 Prime Day might have been in June.

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But since then, 2022 through 2025, Prime Day was in July, mid-July usually.

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And then they just announced, they haven’t given us an exact date,

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but they’ve said it’s going to be in June this year.

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And so one problem with that for Amazon, that means it falls in Q2 instead of Q3.

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So in all these earnings calls, when we’re looking at year-over-year comps for

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quarters, that’s a major impact that they’ll call out.

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But also, you know, for all the vendors, Amazon doesn’t give you a lot of warning

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to prepare for Prime Day and to get your inventory ready, get your offers ready.

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And so people kind of proactively plan on their own, assuming it’s going to

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be in July again this year.

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And so this did cause a little bit of a panic for a lot of big three-piece sellers

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that are now kind of rushing to pull their plans forward to be ready a little

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earlier than they were expecting.

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Very cool. Where do you, more importantly, what’s on your buy list?

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Yeah, I haven’t even thought of what I need.

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You know, frequently I replenish a lot of like cables and charging accessories

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and my wife has banned me from making any more cables into the house.

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So may not be, may not be a big year for that.

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You should get an Apple device to run all your agents.

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So I would, but the Apple device I would like to get for my agents,

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I feel like I need a rack of mac minis and mac minis are very constrained right now they.

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Are they’re i’m sure in chicago there’s not a single one around.

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They’re sold.

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Out here as well.

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Yeah and so i don’t know that that’s going to be a a big i mean we’ll see if

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they get their supply chain straight and out by by uh june but but may not be available yet i.

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Don’t think they will.

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And they are saying memory is going to be a bigger problem yeah.

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Yeah we’ll talk about memory in a little bit,

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So today we’re here to talk about Amazon’s Q1 earnings. I thought I would go

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through a little bit of a setup.

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First of all, it was like the most exciting day for nerds like us ever.

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The first time ever, four of the MAG7, the Magnificent Seven companies,

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and the four we care about the most, announced on the same day.

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So it was at not only the same day, but the same aftermarket hour.

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Someone told me all three press releases hit within 70 seconds of each other.

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CNBC was like all blowing their mind. They had to like bring in all the extra

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hands. It was all hands on deck.

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The same here at the Jason Scott show headquarters. We had our whole team alerted

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to this and watching it very closely.

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Yeah the only thing i i want to slightly point out it you’re the one geek that

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was super excited about this everyone else that covers all these earnings calls

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it was super grumpy about this.

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It was a fun challenge to see like could you process this information as fast as it was coming out.

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Yeah but my heart does go out to all our friends in the equity analyst space

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because that was they did a lot of yeoman work that yeah.

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Yeah we’ve had a lot of them you you know gene Munster, Mark Mahaney,

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Colin, Sebastian, they all, all of them cover these names and it was,

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it was, it was kind of frenetic for them to get everything out.

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Here’s the setup. So we’ll go through this pretty quick. So Microsoft was kind

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of the first, so they all released at like four o’clock, they dropped their

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press releases or like 4.02 and then they have, they always give it 30 minutes

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and then they start the conference calls.

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So Microsoft was first technically, because I think they started at 4.30 and

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then there were some at 5 and some at 5.30.

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Azure did really well. They didn’t talk any about agentic commerce,

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so that was kind of boring.

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So I would kind of rate, from my perspective, Microsoft was the worst.

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But what’s really freaking a lot of people out, and you’ll remember this from

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our Q4 recap, is all this spend on AI.

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And Microsoft’s Azure did really well. It didn’t really beat.

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It was like what you would call a beat in brackets. They slightly beat for their calendar quarter.

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And then Microsoft, to make it confusing, is actually Microsoft’s Q2 announcement.

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But everyone else was Q1 because they have a different fiscal announcement.

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They’re they’re on a calendar quarter basis

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but their fiscal is off by a quarter and i

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know walmart and a lot of the retailers are like not even on a calendar and

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like the whole thing it’s like they don’t even fall on normal quarterly boundaries

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so we won’t we won’t distract from all that so it was pretty good but what freaked

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everyone out was their capex guide they had guided uh previously that they were

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going to spend 160 billion this year and they’re like kind of casually yeah

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we’re going to need to raise that to $190 billion.

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And everyone’s like, whoa, that’s $30 billion more.

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They talked about half of it being due to component costs, to your point about memory.

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All this investment in AI has outrun the ability of factories to make enough memory chips.

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It has to be this very specific high-speed memory, which is also what goes sadly

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into the MacBook Minios, studios, and other items.

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So that’s causing a huge supply problem there.

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Memory, again, We should brand that. And then the other half,

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though, is coming from this just immense wall of demand they’re seeing for what they’re doing.

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They announced everyone’s using these new vanity measures around token generation and consumption.

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So theirs was their customers are now consuming over a trillion tokens a year.

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And that takes out all their internal like copilot and all their internal token generation.

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So that’s just third party customers just chewing up tokens like crazy.

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And then we pivoted to Meta, also known as Facebook. They’re interesting because

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all these other companies,

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these hyperscalers, they’re called, their investment can, there’s a direct tie

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to, so they invest X and you can see Y come out in revenue in the cloud computing part of the company.

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And then there’s some ancillary gain in the other part of the company.

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Meta is a little bit more, it gets washed through.

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So they spend all this money and then it comes out in advertising gains.

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And it’s hard to kind of like tell what was AI and what isn’t,

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but their advertising businesses accelerated pretty materially.

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It grew over 24% year over year, and they launched their new models and they,

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those were pretty well received.

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They’re like number five and six on the leaderboards now. So they’re competitive, but not amazing.

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They did spend a lot of time talking about Agentec Commerce.

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We don’t have time for this, but over on Retail Gentic, I actually clipped the

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five-minute answer that Zuckerberg gave about their vision for where they see

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this going. And it’s really interesting to listen to.

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He kind of leaned in and said that

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they basically have a right to own this because they have so much data.

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They know all about products and what buyers want and that they think they can

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do something, quote unquote, really special in shopping.

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So it’d be interesting to see because, and that Wall Street analyst made me

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think of you, they kind of said, hey, you kind of tried this before and abandoned it.

00:15:14.918 –> 00:15:18.358
And his answer to that was, you know, kind of like the time is now.

00:15:18.498 –> 00:15:22.758
We think we can actually solve this in a way that’s unique that we never could before.

00:15:22.938 –> 00:15:25.658
So I thought that was an interesting little piece there.

00:15:26.138 –> 00:15:29.118
Did you get anything from Microsoft and Meta you want to throw in the mix?

00:15:29.498 –> 00:15:33.298
Yeah. So, I mean, mainly on the Meta side, A, I’m excited that they’re excited.

00:15:33.298 –> 00:15:37.658
You know, I have a healthy dose of cynicism from past efforts,

00:15:37.738 –> 00:15:42.178
but I do agree they have a ton of valuable context.

00:15:42.538 –> 00:15:47.558
And the marquee thing on that ad growth, that acceleration of digital ad growth,

00:15:47.578 –> 00:15:54.198
is they actually surpassed Google for digital ads in Q1, which is the first

00:15:54.198 –> 00:15:55.258
time that’s ever happened.

00:15:56.458 –> 00:16:00.278
You know, you should think about the whole ecosystem. A lot of that is on Instagram

00:16:00.278 –> 00:16:05.178
and WhatsApp. It’s not like ad growth is exploding on Facebook necessarily,

00:16:05.178 –> 00:16:07.538
but it’s pretty interesting.

00:16:07.958 –> 00:16:12.098
And, you know, there’s a lot of commerce intent that still happens across those

00:16:12.098 –> 00:16:16.978
platforms. So I do think they have a right to win if they’re able to get the

00:16:16.978 –> 00:16:19.938
execution right. So I hope they try some cool stuff.

00:16:20.778 –> 00:16:27.078
Yep. And then they previously had guided to 125 to what they kind of give a range of CapEx.

00:16:27.218 –> 00:16:29.178
So they did 125 to 145 billion.

00:16:30.298 –> 00:16:36.218
That was what they actually stated going forward. And then previously they had done 115 to 135.

00:16:36.498 –> 00:16:39.418
So they nudged it 10 billion. So not nearly as much as Microsoft did.

00:16:40.118 –> 00:16:45.298
But Wall Street’s having a hard time. So they were really kind of concerned with Microsoft.

00:16:45.958 –> 00:16:49.118
Also, Microsoft lost exclusivity on the open AI.

00:16:49.538 –> 00:16:54.298
And, or they traded it away. We’ll talk about where it went here in a minute.

00:16:54.818 –> 00:16:57.098
But, you know, you see, they were the only place you could go.

00:16:57.258 –> 00:17:01.518
Azure was the only place you could go to get, you know, basically run OpenAI’s

00:17:01.518 –> 00:17:02.438
model, which is one of the most

00:17:02.438 –> 00:17:05.518
popular ones with startups. That’s what we use at RefiBuy and whatnot.

00:17:06.018 –> 00:17:08.678
So there was a little bit of negativity around that. That was kind of a surprise.

00:17:08.998 –> 00:17:13.458
And then a lot of people are kind of scratching their head on like that big $30 billion bump,

00:17:14.462 –> 00:17:18.902
And then with Meta, they’re having a hard time kind of like believing the story

00:17:18.902 –> 00:17:20.302
that it’s driving all this ad.

00:17:20.442 –> 00:17:22.842
And there’s a little bit of a wait and see on these new models that they’re

00:17:22.842 –> 00:17:25.062
coming out with. And also Agentec Commerce.

00:17:25.602 –> 00:17:29.822
And then Google came out and they just absolutely crush it on every dimension

00:17:29.822 –> 00:17:33.222
you can imagine. We could do like a two-hour podcast just on this.

00:17:33.442 –> 00:17:38.402
But their YouTube grew faster than it ever has.

00:17:38.702 –> 00:17:44.462
Their ad stuff has gotten so much better. And then I was pleasantly surprised,

00:17:44.602 –> 00:17:48.802
but Sundar has definitely gotten religion around Agentec Commerce after NRF.

00:17:49.322 –> 00:17:55.422
They actually tracked these mentions and they were close. I thought for sure

00:17:55.422 –> 00:18:00.722
they were going to win because they mentioned, you know, five or six times talking

00:18:00.722 –> 00:18:04.122
about UCP and Agentec Commerce and the prepared remarks.

00:18:04.242 –> 00:18:07.222
Make sure the press release prepared remarks and then Q&A.

00:18:07.522 –> 00:18:10.622
And then they got beat handily by someone we’ll talk about in a second.

00:18:10.822 –> 00:18:13.662
So that was exciting for me from that lens.

00:18:13.862 –> 00:18:18.982
Their vanity metric is token volume also, but they talk about,

00:18:19.202 –> 00:18:22.002
they always change it too, which is frustrating.

00:18:22.302 –> 00:18:27.522
This time they talked about they generating 10 billion a minute through the API.

00:18:27.902 –> 00:18:35.222
And then they, Gemini has grown 3x from just last quarter and daily tokens generated.

00:18:35.222 –> 00:18:38.462
They spent a lot of time talking about UCP. We’ll talk about that in a second.

00:18:38.702 –> 00:18:42.702
And then they guided their CapEx up. Let me get the actual number here.

00:18:43.222 –> 00:18:47.082
It’s hard to pull this stuff from all over the place. So they had prior,

00:18:47.362 –> 00:18:50.802
they, you know, if you boil it down, they basically did a $5 billion bump.

00:18:50.962 –> 00:18:54.602
So of the increases, they were the least, well, Amazon, spoiler,

00:18:54.762 –> 00:18:57.042
was unchanged because they had put such a big number out, but.

00:18:57.824 –> 00:19:01.864
So, so that was really well received plus, so they did what’s called a beat

00:19:01.864 –> 00:19:06.904
and a raise, whereas I would say meta and Microsoft were beat bracket,

00:19:07.164 –> 00:19:10.584
meaning they beat for the current corner. And then in the future quarter,

00:19:10.704 –> 00:19:12.264
they kind of bracketed where Wall Street was.

00:19:12.404 –> 00:19:14.944
It kind of came in line with, with where Wall Street is.

00:19:15.804 –> 00:19:19.424
And that, see, that was, that was the setup.

00:19:19.604 –> 00:19:24.584
So that’s the setup. The thing to watch for with Google is we do have Google I.O.

00:19:24.884 –> 00:19:29.064
Coming up in mid-May, and I’ll be at that. So that’s exciting.

00:19:29.184 –> 00:19:30.384
I forgot to mention that at the top.

00:19:30.524 –> 00:19:33.784
So I got an invite to go to Google I.O., never been there. It’s always been

00:19:33.784 –> 00:19:35.604
on kind of one of my conference bucket list.

00:19:35.884 –> 00:19:39.424
So I’m going to go hang out with all the Google nerds and see what they’re going

00:19:39.424 –> 00:19:42.324
to be doing around Agente Commerce. So I’ll report back on that.

00:19:43.024 –> 00:19:45.744
Very cool. I’m going to expect a special report just on the cafeteria.

00:19:46.264 –> 00:19:49.944
Oh, yeah, we actually are in some Google building. So I’ve been to,

00:19:49.944 –> 00:19:53.864
I’ve been to the Google cafeteria and I can tell you it’s going to be lavish and crazy.

00:19:54.204 –> 00:19:56.324
A lot of food. I don’t understand. I’m a simple guy.

00:19:58.704 –> 00:19:59.764
That’s awesome. Yeah.

00:20:01.256 –> 00:20:03.436
And Scott, you teased something about UCP.

00:20:04.936 –> 00:20:09.556
Yeah. So that brings us to the main event, and it wouldn’t be the Jason Scott

00:20:09.556 –> 00:20:12.036
show without a little bit of Amazon news.

00:20:13.136 –> 00:20:17.256
Yeah. So obviously, people probably tuned in here because they’re used to us

00:20:17.256 –> 00:20:19.296
talking about Amazon quarterly earnings.

00:20:19.496 –> 00:20:22.656
We made you pay a horrible price with all that precursor stuff.

00:20:22.856 –> 00:20:26.176
So spoiler alert for any of you that just care about the Amazon equity,

00:20:26.176 –> 00:20:32.196
it was a wild ride. It opened down like 4% after hours.

00:20:32.376 –> 00:20:35.876
And then once trading started up next day, I think it bounced back up 4%.

00:20:35.876 –> 00:20:44.496
And so that plus to minus 4% swing on an almost $3 trillion market cap company, that’s ginormous.

00:20:44.616 –> 00:20:49.656
That’s like $200 billion in value coming and going in a single day.

00:20:49.656 –> 00:20:53.076
So if you’re someone that pays attention to this stuff day to day,

00:20:53.196 –> 00:20:58.936
which I would not recommend, that was probably anxiety-ridden.

00:20:59.456 –> 00:21:05.816
You know, the top line is that AWS is killing it.

00:21:05.996 –> 00:21:11.436
They basically, like, from an operational standpoint, like, it was a beat in bracket.

00:21:11.656 –> 00:21:15.136
Like, they beat every number. They were a little more conservative on their projections.

00:21:15.136 –> 00:21:22.236
But I think what drove that swing was that they they did well in all their numbers,

00:21:22.296 –> 00:21:27.236
but they also said that, hey, the enormous CapEx spending is going to continue

00:21:27.236 –> 00:21:28.436
for the foreseeable future.

00:21:28.696 –> 00:21:33.116
And so I think it’s I think investors are having a lot of anxiety over the eye

00:21:33.116 –> 00:21:38.076
watering investments that that all these companies are proposing making in order

00:21:38.076 –> 00:21:40.716
to to win this this future agentic market.

00:21:42.292 –> 00:21:44.832
Yeah. Yeah. It was really interesting to watch the after hours.

00:21:45.072 –> 00:21:49.212
It was so much that people didn’t know how to adjust it. Like, like they have.

00:21:49.672 –> 00:21:52.412
So Amazon was already complicated, right? You got a retailer,

00:21:52.672 –> 00:21:56.972
cloud computing, and then listeners know there’s actually a marketplace in there.

00:21:57.452 –> 00:22:01.192
And there’s an ad piece. And we talk about that. And they have the devices and

00:22:01.192 –> 00:22:03.532
other stuff, but that’s kind of fallen to the side there.

00:22:03.692 –> 00:22:06.372
And now it’s kind of like, so that’s like four big things.

00:22:06.572 –> 00:22:09.952
There’s a fifth thing now, which is like all this AI stuff. they

00:22:09.952 –> 00:22:13.032
they are now a hardware chip they’re now basically

00:22:13.032 –> 00:22:15.832
competing with nvidia so that’s like a sixth thing

00:22:15.832 –> 00:22:18.592
and then there’s a seventh thing which is they’re now a

00:22:18.592 –> 00:22:23.252
satellite company and it’s just like everyone’s like it kind of reminds me of

00:22:23.252 –> 00:22:28.412
ge where there’s like so many pieces it’s hard to consume what any of it means

00:22:28.412 –> 00:22:31.672
when they drop their press release now they’ve gotten like longer and way more

00:22:31.672 –> 00:22:36.712
complicated and yeah so so it just takes a while for everyone to kind of like to just like,

00:22:36.792 –> 00:22:40.132
well, is this good or bad news? Like, what is going on inside of this thing?

00:22:40.912 –> 00:22:44.692
But because you are Jason Scott Show listeners, we’re going to peel the onion

00:22:44.692 –> 00:22:50.432
and kind of for the retail lens, we’re going to share what we saw that we think was most interesting.

00:22:50.912 –> 00:22:55.072
Let’s start with the headline numbers. So Jason mentioned it was a beat and a bracket.

00:22:55.572 –> 00:23:00.652
Revenue was up 17% year on year, which was great, which really kind of crushed consensus.

00:23:01.012 –> 00:23:05.812
Consensus was at about $178 billion and they came in at $181.5.

00:23:06.292 –> 00:23:11.412
That’s a nice, clean 3.5 billion beat, which is, yeah, not too shabby.

00:23:11.712 –> 00:23:16.912
I don’t know, Jason, do you usually exceed your family budget by 3.5 billion on the revenue side?

00:23:17.392 –> 00:23:18.372
Only on the spending side.

00:23:19.112 –> 00:23:22.992
Dang it, me too. It’s because of Prime Day. We can blame it on Prime Day.

00:23:23.452 –> 00:23:25.212
Every day is Prime Day at my house, Scott.

00:23:29.612 –> 00:23:33.312
Amazon, maybe you contributed. Oh, and they actually said thank you to this

00:23:33.312 –> 00:23:36.792
guy in Chicago that contributed to that $3.5 billion.

00:23:37.272 –> 00:23:39.132
Yeah. Doug, you’re welcome.

00:23:39.792 –> 00:23:42.032
Yeah. And then Starbucks probably had a call out for you, dude.

00:23:43.032 –> 00:23:46.712
The operating income, a surprise to the upside.

00:23:46.992 –> 00:23:50.832
So it was an all-time record, which is kind of not that big a deal because they’ve

00:23:50.832 –> 00:23:52.232
just been chugging on that.

00:23:52.672 –> 00:23:56.352
Consensus was $19 billion and they came in at $24 billion, which is pretty amazing

00:23:56.352 –> 00:23:59.472
on the income side. And all that flowed through to EPS as well.

00:24:00.132 –> 00:24:05.372
So everyone was expecting with all this CapEx and investment that the profit

00:24:05.372 –> 00:24:06.552
numbers would be under pressure.

00:24:06.792 –> 00:24:10.992
So everyone was kind of perplexed by how this could happen, but we’re going

00:24:10.992 –> 00:24:14.852
to actually peel that apart and reveal what’s going on inside of there,

00:24:15.092 –> 00:24:18.412
starting with the retail org. Jason, you want to take that?

00:24:19.032 –> 00:24:22.412
Yeah. So for those of you that are newer listeners, Amazon actually started

00:24:22.412 –> 00:24:25.432
out as a retailer. I know that’ll be surprising. Yeah.

00:24:25.432 –> 00:24:26.852
They sold books. Do you remember that?

00:24:26.972 –> 00:24:31.432
Yeah. Those are blogs that used to be printed on papyrus. And I believe their

00:24:31.432 –> 00:24:33.372
first mission was to be the world’s largest bookseller.

00:24:33.992 –> 00:24:35.372
That’s when we started the podcast.

00:24:35.612 –> 00:24:35.932
Yeah.

00:24:36.932 –> 00:24:37.692
On papyrus.

00:24:37.812 –> 00:24:44.352
It took a time to get to listeners. Yeah. Yeah. So today when they talk about retail,

00:24:44.492 –> 00:24:49.092
it’s really complicated because they talk about their income numbers and their

00:24:49.092 –> 00:24:54.252
sales numbers, which are not perfectly analogous to how much goods they sold.

00:24:54.412 –> 00:25:00.432
So we often talk about this hybrid number that we call gross merchandise value,

00:25:00.572 –> 00:25:04.772
which is, hey, forget the fact that some stuff Amazon sells they own and they

00:25:04.772 –> 00:25:06.492
take credit for 100% of the sale.

00:25:06.652 –> 00:25:10.752
And a lot of the stuff they sell is a marketplace and they take a commission on that.

00:25:10.852 –> 00:25:15.752
So when they talk about their revenue, they’re adding the full cost of the goods

00:25:15.752 –> 00:25:20.912
they own and they’re adding the fees they charge on the goods that other people own.

00:25:21.092 –> 00:25:25.572
And so those numbers are interesting to look at on a comparative basis.

00:25:25.692 –> 00:25:27.772
Did they go up or down from last quarter and last year?

00:25:27.972 –> 00:25:32.112
They’re not helpful to say, how did they do versus Walmart or Best Buy or some

00:25:32.112 –> 00:25:36.252
other retailer? And so on all those numbers, of course, they performed very well.

00:25:36.512 –> 00:25:41.072
Like their North American revenue was $104 billion, which is…

00:25:41.832 –> 00:25:46.912
12%. Last quarter, they were up like 8%. So it’s an accelerated growth.

00:25:47.792 –> 00:25:51.292
International grew even faster, which international is a younger,

00:25:51.492 –> 00:25:53.532
less mature business. So they’re about 40 billion.

00:25:54.112 –> 00:26:00.472
And in international, it grew like 19%. And so they generated better margins

00:26:00.472 –> 00:26:02.832
than they traditionally do.

00:26:03.032 –> 00:26:05.712
Their income ended up at like 8.3 billion.

00:26:06.052 –> 00:26:10.572
But we like to estimate that GMV number, right?

00:26:10.712 –> 00:26:14.752
And so, Scott, I used to go based on an estimate you published,

00:26:14.752 –> 00:26:18.492
and then we started calculating it. Now the analysts do a really good job.

00:26:18.652 –> 00:26:22.212
So both Morgan Stanley and Citibank had these really sophisticated models that

00:26:22.212 –> 00:26:27.552
I borrowed from, and their models basically agree on USGMV.

00:26:27.912 –> 00:26:32.952
So USGMV for Q1 was probably up about 10.6%.

00:26:32.952 –> 00:26:37.732
So to put that in perspective, the US Department of Commerce says that core

00:26:37.732 –> 00:26:42.012
retail, which is kind of a similar set of services to Amazon retail,

00:26:42.492 –> 00:26:46.212
core retail for ChewOne was up 4.75%.

00:26:46.212 –> 00:26:51.032
Amazon is the first or second largest retailer in the US, depending on how you want to count.

00:26:51.332 –> 00:26:59.532
And their core retail business was up 10.6%. So more than they’re amongst the

00:26:59.532 –> 00:27:02.492
two biggest companies in the industry, and they’re growing at more than twice

00:27:02.492 –> 00:27:04.932
the rate of the industry average.

00:27:05.212 –> 00:27:10.472
So that is your marquee takeaway about how the retail performed this quarter.

00:27:11.343 –> 00:27:14.823
Yeah, if you, you and I always just kind of, we collaborated on a chart that

00:27:14.823 –> 00:27:19.483
was kind of tracking when would Amazon’s GMV pass Walmart. I think they’ve passed

00:27:19.483 –> 00:27:21.963
each other a long time ago, right, from that perspective, but not,

00:27:22.083 –> 00:27:24.963
but has total revenue, hasn’t total revenue actually gotten close to?

00:27:25.563 –> 00:27:29.183
Well, so, yeah, total revenue is getting close, but it, the,

00:27:29.283 –> 00:27:32.363
both of them have slightly not apples to apples numbers.

00:27:32.583 –> 00:27:36.663
So I would argue, like, for a long time it was, oh, they’re passing the non-grocery

00:27:36.663 –> 00:27:41.583
revenue at Walmart because Walmart has grocery and Amazon did not. right?

00:27:42.143 –> 00:27:45.623
And then, you know, Amazon has really turned up the heat on grocery.

00:27:45.843 –> 00:27:51.723
And so now it’s closer to apples to apples. So now Amazon is ahead of Walmart U.S.

00:27:52.163 –> 00:27:53.883
But Walmart Inc.

00:27:54.363 –> 00:27:59.303
Has Sam’s Club revenue in the U.S. So if you add the U.S. Sam’s Club revenue with U.S.

00:27:59.603 –> 00:28:03.523
Walmart revenue, depending on whose estimates you believe, they’re super close.

00:28:03.803 –> 00:28:06.283
Depending on whose estimates you believe, it’s neck and neck.

00:28:06.443 –> 00:28:08.563
And Walmart, we don’t know their Q1 numbers yet.

00:28:08.703 –> 00:28:13.203
So we’ll have to see if They’re like, this is a big growth quarter for Amazon.

00:28:13.343 –> 00:28:17.923
We’ll have to see if Walmart’s able to keep up. But the general story that Walmart

00:28:17.923 –> 00:28:20.483
is also vastly outperforming the market is true.

00:28:20.663 –> 00:28:27.263
So the two largest players are outperforming and that creates a huge bifurcation in the market.

00:28:29.016 –> 00:28:33.016
Interesting. Cool. Anything in the fulfillment and delivery that tickled your fancy?

00:28:33.596 –> 00:28:38.336
Well, like my, my big takeaway is that they’re getting the goods closer and

00:28:38.336 –> 00:28:41.516
closer to the consumer and they’re delivering the goods faster and faster.

00:28:41.636 –> 00:28:43.996
Right. So they have all these vanity metrics.

00:28:44.156 –> 00:28:48.936
They like to talk about, about how, how much, how many goods they’re delivering more quickly.

00:28:48.936 –> 00:28:53.356
So there there’s now like 300 cities, if I’m remembering right,

00:28:53.576 –> 00:28:57.156
that are doing one hour delivery, including, you know, myself here in Chicago,

00:28:57.536 –> 00:29:00.696
there’s like 2000 cities that are doing three hour delivery.

00:29:00.956 –> 00:29:07.796
And that’s on like 90,000 items for same day delivery. They’re in the millions.

00:29:08.036 –> 00:29:11.536
And so they, they took a shot, like, I assume that was aimed at Walmart where

00:29:11.536 –> 00:29:15.396
it was kind of funny where they, they said something like that’s 10 times the

00:29:15.396 –> 00:29:19.896
assortment of items we deliver same day as you can get from a big box store.

00:29:21.036 –> 00:29:26.196
And so, so the amount of items that they can deliver fast and the speed at which

00:29:26.196 –> 00:29:29.136
fast is keep going up and up.

00:29:29.516 –> 00:29:33.016
And what’s super interesting is the mix is changing super fast.

00:29:33.156 –> 00:29:39.496
So it used to be that it was predominantly general merchandise and not a lot of grocery.

00:29:39.696 –> 00:29:44.396
Now it’s a lot of grocery, including fresh and frozen and perishable.

00:29:44.556 –> 00:29:48.056
So I think we’ll talk about that a little bit later. But basically,

00:29:48.416 –> 00:29:55.336
the Amazon On retail story, the growth is largely coming from moving goods to

00:29:55.336 –> 00:30:00.816
closer to the customer, delivering faster, and therefore getting a bigger share of wallet.

00:30:01.216 –> 00:30:01.836
Got it.

00:30:02.866 –> 00:30:08.306
Yeah there’s part of the thing i thought was interesting was this india there

00:30:08.306 –> 00:30:12.406
was one country okay it was tokyo this amazon now was really interesting it

00:30:12.406 –> 00:30:14.146
seemed like a it’s in 12 countries,

00:30:14.866 –> 00:30:20.266
yeah what do they call our yeah what do they call go puff and that stuff here

00:30:20.266 –> 00:30:23.666
that’s kind of like followed by the wayside a little bit uh instant.

00:30:23.666 –> 00:30:24.546
Commerce is that what.

00:30:24.546 –> 00:30:26.486
You mean generically yeah Yeah.

00:30:26.886 –> 00:30:27.766
Yeah. Quick commerce sometimes.

00:30:28.226 –> 00:30:32.826
Yeah. Is this instant slash quick commerce like more popular in these areas

00:30:32.826 –> 00:30:33.706
and that’s why they’re doing it?

00:30:33.706 –> 00:30:40.326
Yes, exactly. Well, so two things, different labor costs, which is complicated, right?

00:30:40.506 –> 00:30:47.386
So both, you know, the labor rate for deliverers in India and China is much lower than it is here.

00:30:47.626 –> 00:30:52.366
The average income is, of course, also much lower. So it’s not like you have

00:30:52.366 –> 00:30:56.966
the same wealthy consumers ordering this stuff for instant delivery and it’s

00:30:56.966 –> 00:30:58.166
just cheaper to deliver there.

00:30:58.426 –> 00:31:00.226
Like the economic model is very

00:31:00.226 –> 00:31:04.266
different, but it is more affordable to deliver stuff super fast there.

00:31:04.446 –> 00:31:10.886
And so both Amazon and Flipkart are competing significantly in this 30-minute

00:31:10.886 –> 00:31:16.426
category and consumers are adopting it and it’s a big deal.

00:31:17.480 –> 00:31:21.900
Very cool. Anything jumped out at you on the revenue breakdown?

00:31:22.060 –> 00:31:23.740
You want me to tackle that or you want to jump in?

00:31:24.240 –> 00:31:30.600
Yeah, yeah, no. So the historically, you know, they’ve had this big online number

00:31:30.600 –> 00:31:32.700
and they’ve had a smaller physical number.

00:31:32.880 –> 00:31:39.440
The physical number used to have a lot of little retail concepts in it, like Amazon Go stores,

00:31:40.100 –> 00:31:43.500
Amazon Fresh stores, their grocery stores, they had the four star stores,

00:31:43.660 –> 00:31:46.820
they had fashion stores, they had a beauty salon, that all this stuff,

00:31:46.980 –> 00:31:49.920
they’ve closed the vast majority of those retail concepts.

00:31:50.180 –> 00:31:55.480
So today, physical retail at Amazon is almost exclusively Whole Foods.

00:31:55.740 –> 00:32:01.000
And so if you look at the Whole Foods number, it was up like 4.6%,

00:32:01.000 –> 00:32:04.900
which is actually pretty decent for Whole Foods.

00:32:05.040 –> 00:32:10.620
Whole Foods hasn’t had like ginormous growth and that’s a little faster than

00:32:10.620 –> 00:32:13.700
the industry average on growth, even for Whole Foods,

00:32:13.860 –> 00:32:18.840
which is kind of interesting and indicative of a potential kind of turnaround

00:32:18.840 –> 00:32:24.220
acceleration of Whole Foods, which has been kind of static for a while.

00:32:24.560 –> 00:32:28.760
So on the online versus physical, that to me is interesting.

00:32:29.060 –> 00:32:32.140
I want to say the third-party mix went down a little bit this quarter.

00:32:32.640 –> 00:32:37.340
It’s still about 60% of what Amazon sells in the US is third-party stuff.

00:32:37.620 –> 00:32:42.380
And so I I think the fluctuation is a little variable, I would say,

00:32:42.520 –> 00:32:44.520
and there’s not a lot of coverage from this from Amazon.

00:32:44.920 –> 00:32:49.320
There’s a lot of controversy in the third party community because Amazon’s been jacking up the fees.

00:32:49.480 –> 00:32:53.460
They famously added a fuel surcharge this quarter.

00:32:53.680 –> 00:32:58.360
And there’s a strong sentiment that Amazon doesn’t treat its third party sellers very well.

00:32:58.580 –> 00:33:03.400
And, you know, there was a time when Amazon spent a lot of narrative in these

00:33:03.400 –> 00:33:05.500
earnings calls talking about third party sellers.

00:33:05.500 –> 00:33:10.160
And it would be easy for them to feel like they were taken for granted in both

00:33:10.160 –> 00:33:16.220
Andy’s shareholder letter this year and in the earnings call. So that’s interesting.

00:33:17.445 –> 00:33:21.665
You know, subscription continues to grow. Both, they’re adding new memberships,

00:33:21.785 –> 00:33:25.505
they’re adding new services for Prime, and they’re jacking up the rates on Prime.

00:33:25.685 –> 00:33:30.425
My Primer news this month, I just got my note about a higher price.

00:33:30.765 –> 00:33:35.925
And because of the shift to grocery, the unit sold is growing even faster than the goods.

00:33:36.685 –> 00:33:42.585
Yeah, very cool. Why do you think Whole Foods accelerated a little bit?

00:33:42.585 –> 00:33:47.345
So they have leaned into some operational efficiencies at Whole Foods.

00:33:47.585 –> 00:33:52.065
And Whole Foods was kind of like independently run stores where managers had

00:33:52.065 –> 00:33:57.125
a lot of autonomy and Amazon kind of famously rolled back some of that autonomy

00:33:57.125 –> 00:34:00.725
and people felt like that hurt the store experience.

00:34:00.725 –> 00:34:06.485
Well, you know, now they have, they have like Doug Harrington there, who’s a real grocer.

00:34:06.665 –> 00:34:12.245
And they’re really leaning into still keeping things federated as opposed to

00:34:12.245 –> 00:34:15.505
letting these be autonomous businesses, but doing a better job.

00:34:15.605 –> 00:34:17.205
They’re inventing more foods.

00:34:17.385 –> 00:34:22.785
They’re, they’re improving the, the 365 private product and in Whole Foods.

00:34:22.785 –> 00:34:28.145
And they are now announcing for the first time, all their brick and mortar effort

00:34:28.145 –> 00:34:29.505
was on these new concepts.

00:34:29.845 –> 00:34:33.985
Now that Whole Foods is really their only concept, they’re opening new Whole

00:34:33.985 –> 00:34:35.865
Foods in new markets for the first time ever.

00:34:36.145 –> 00:34:42.205
And that, I would argue, is actually the biggest Achilles heel of Whole Foods is just their reach.

00:34:42.365 –> 00:34:44.365
They’re just not that close to that many consumers.

00:34:44.605 –> 00:34:49.385
And so, you know, the fastest way for a retailer that doesn’t truly have a national

00:34:49.385 –> 00:34:53.385
footprint to grow is to open stores in new markets.

00:34:53.565 –> 00:34:56.705
And so I actually think you’re going to see the rate of growth of Whole Foods

00:34:56.705 –> 00:35:00.145
go up as these new stores come online.

00:35:00.465 –> 00:35:01.105
Very cool.

00:35:02.166 –> 00:35:06.106
Yeah. They’ve done a lot of, you know, nothing super new there,

00:35:06.246 –> 00:35:08.206
but integrating the Amazon experience in there.

00:35:08.426 –> 00:35:14.166
So whenever I go do returns at Whole Foods, the line is like the longest part of the grocery store.

00:35:14.526 –> 00:35:14.646
Yeah.

00:35:14.766 –> 00:35:16.886
So maybe that’s bringing some people in. Yeah.

00:35:17.086 –> 00:35:20.126
They keep tweaking it. I will say I personally am very sad.

00:35:20.446 –> 00:35:23.526
They’re turning off one feature in those stores that I thought was really good,

00:35:23.626 –> 00:35:26.626
which is called Amazon One, which is the palm reader.

00:35:26.946 –> 00:35:28.666
Yeah, the palm. I could never get it to work.

00:35:28.666 –> 00:35:33.666
Yeah, that is why. They had a lot of operational trouble with it.

00:35:33.746 –> 00:35:38.066
But like when it worked, which it always worked for me, it was super convenient. It was fast.

00:35:38.226 –> 00:35:42.106
And it’s still an annoying experience at Whole Foods. You got to give them some

00:35:42.106 –> 00:35:46.886
kind of payment method and you have to separately give them your Amazon Prime number.

00:35:47.206 –> 00:35:51.406
And with the Palm, you just waved your hand over the thing and it all magically happened.

00:35:52.486 –> 00:35:56.766
Yeah, not much, as you mentioned, on the marketplace side, not much really exciting

00:35:56.766 –> 00:35:59.906
there, just like kind of flat to down very ever so slightly.

00:36:01.385 –> 00:36:04.365
I didn’t really even see Wall Street spend time on it because there’s so much

00:36:04.365 –> 00:36:08.565
other stuff that the marketplace has kind of fallen by the wayside.

00:36:08.565 –> 00:36:10.545
It’s just like not the exciting new thing anymore.

00:36:10.885 –> 00:36:15.825
I would argue that that is more broadly true of the entire retail category at Amazon.

00:36:16.745 –> 00:36:19.525
It’s kind of a sideshow to the whole other stuff.

00:36:19.925 –> 00:36:24.285
Yeah, yeah. And maybe we’ll come back to that at the end. But I would say the

00:36:24.285 –> 00:36:29.585
big standout thing, and they didn’t spend a lot of time on it, per our last point.

00:36:29.765 –> 00:36:35.305
But the biggest news, the biggest thing to me in the whole Amazon retail ecosystem

00:36:35.305 –> 00:36:38.545
is their emergence as a credible grocer.

00:36:38.825 –> 00:36:43.905
And they threw out a good new stat in the earnings call, which is that cumulatively

00:36:43.905 –> 00:36:49.925
in the U.S. They sold $150 billion of groceries in 2025, which makes them the

00:36:49.925 –> 00:36:51.885
second largest grocer in the U.S.

00:36:52.065 –> 00:36:54.305
Behind Amazon. So that puts them ahead of Kroger.

00:36:54.825 –> 00:36:58.545
And that was absolutely far from true a year ago.

00:36:58.545 –> 00:37:05.225
So this big initiative they did to put climate controlled zones in all the fulfillment

00:37:05.225 –> 00:37:12.185
centers and the sortation centers and start delivering grocery with their general

00:37:12.185 –> 00:37:15.805
merchandise and having a unified experience and the faster delivery.

00:37:16.025 –> 00:37:23.385
All that is totally working and they’ve become the number two grocer in the U.S. And that’s huge.

00:37:24.833 –> 00:37:28.133
Yeah and it did get kind of swept over yeah so i

00:37:28.133 –> 00:37:31.493
actually didn’t see that so thanks for a reason though yeah the

00:37:31.493 –> 00:37:34.533
but what was the at the front uh

00:37:34.533 –> 00:37:37.953
if grocery was kind of the backstory on the back burner then

00:37:37.953 –> 00:37:43.593
aws was very much on the front burner with the gas turned to high it was the

00:37:43.593 –> 00:37:47.833
start of the show there’s if you remember when we did our last show on amazon

00:37:47.833 –> 00:37:52.733
where we talked about the q4 earnings there was this concern right there was

00:37:52.733 –> 00:37:56.753
a bear case that kind of was winning in the Wall Street sentiment wars where they’re like,

00:37:57.413 –> 00:38:00.493
yeah, you say you’re capacity constrained, you’re spinning all this,

00:38:00.633 –> 00:38:02.133
your margin is going to compress.

00:38:02.853 –> 00:38:09.593
You don’t have open AI, you don’t really have your own model, what’s going on here?

00:38:10.013 –> 00:38:13.733
So they really eliminated all those concerns in one quarter,

00:38:13.873 –> 00:38:14.853
which is pretty amazing.

00:38:15.353 –> 00:38:21.513
So number one, AWS revenue accelerated, And it’s on this kind of like linear

00:38:21.513 –> 00:38:24.013
acceleration path where if

00:38:24.013 –> 00:38:27.553
we go back a couple quarters, it was kind of at 17% year over year growth.

00:38:27.733 –> 00:38:32.693
Then it went to 20% and then to 24, which was pretty good in fourth quarter.

00:38:32.853 –> 00:38:35.693
And then here in Q1, it grew to 28% year over year.

00:38:35.913 –> 00:38:39.593
This is a thing that’s already at like 40 billion and it’s like accelerating.

00:38:39.793 –> 00:38:43.133
So that’s the AI tailwind really starting to show up.

00:38:43.633 –> 00:38:47.833
But then everyone’s always like, yeah, but your margins, margin, margin, margin.

00:38:48.073 –> 00:38:54.673
So this was the biggest surprise of the quarter on the beat was the AWS operating margin came in at 37.8.

00:38:54.833 –> 00:39:00.353
Everyone thought it was going to go down and it bumped up, which was pretty wild.

00:39:01.309 –> 00:39:05.809
One of the things driving that is they invested in their own chipset called

00:39:05.809 –> 00:39:09.529
trainium now this is a misnomer because you actually don’t train ai with this

00:39:09.529 –> 00:39:10.569
thing it’s an inference chip.

00:39:11.229 –> 00:39:15.069
But historically for some reason they called it trainium because you

00:39:15.069 –> 00:39:18.189
could use it for training but it actually ends up being better for inference back

00:39:18.189 –> 00:39:21.189
when ai was new everything was training so that’s

00:39:21.189 –> 00:39:24.089
like no one no one really cared about inference but now that

00:39:24.089 –> 00:39:27.089
it’s getting older running the ai models and

00:39:27.089 –> 00:39:30.589
scaling them has become more important than training and

00:39:30.589 –> 00:39:33.449
amazon ended up in a good place at a good time

00:39:33.449 –> 00:39:37.569
google has a similar chip called tpu and

00:39:37.569 –> 00:39:44.589
it is on a similar trajectory but i would say one of the areas that’s become

00:39:44.589 –> 00:39:48.689
interesting a little bit for google but mostly amazon they now have people wanting

00:39:48.689 –> 00:39:53.829
to buy just the chips and so they actually want either Amazon to host a rack of these chips,

00:39:54.049 –> 00:39:57.209
which is a little bit outside of how AWS normally works is they’re not usually

00:39:57.209 –> 00:39:59.949
like a hardware provider, right? They’re a compute provider.

00:40:00.329 –> 00:40:03.209
And then they even said there’s this huge demand for people to just,

00:40:03.309 –> 00:40:06.369
they just like want to buy them and host them themselves in their own data centers.

00:40:06.649 –> 00:40:09.389
This would be like the OpenAI’s and Anthropics.

00:40:09.769 –> 00:40:12.209
We’ve kind of hinted at this, but I’ll go ahead and explicitly say it.

00:40:12.289 –> 00:40:17.569
One of the big announcements within the AWS bucket is Amazon did get out of

00:40:17.569 –> 00:40:21.269
their exclusivity, excuse me, OpenAI got out of exclusivity with Microsoft.

00:40:21.669 –> 00:40:27.169
And now AWS has within AWS and the piece inside of there called Bedrock,

00:40:27.369 –> 00:40:32.509
you do have access to the OpenAI models now. And that’s a huge win for Amazon.

00:40:32.909 –> 00:40:37.669
A lot of people speculate this is anticipation of OpenAI going public.

00:40:38.069 –> 00:40:44.049
And so that was a really big win within here as well, where everyone is pretty

00:40:44.049 –> 00:40:48.549
excited that, okay, all those little bear things that kind of added up to be,

00:40:48.609 –> 00:40:49.829
you know, some negativity.

00:40:50.529 –> 00:40:54.289
Every one of them got washed away in like a one hour phone call. It’s kind of crazy.

00:40:54.649 –> 00:40:58.889
And then what really kind of like blew people’s mind was they all disclosed

00:40:58.889 –> 00:41:00.989
this backlog, this backlog.

00:41:02.787 –> 00:41:05.987
Previously, you know, I think it was like 200 billion.

00:41:06.267 –> 00:41:09.567
So it was pretty big, but they basically said, it was kind of funny.

00:41:09.647 –> 00:41:12.747
It was in a Q&A. They just kind of dropped it in there because it usually comes

00:41:12.747 –> 00:41:14.787
out in one of the filings later.

00:41:15.147 –> 00:41:18.327
So one of the Wall Street guys said, hey, what’s the backlog?

00:41:18.487 –> 00:41:21.047
And Jassy said, yeah, it’s 364 billion.

00:41:21.527 –> 00:41:24.347
Remember, it used to be 200 billion. So it like doubled in one quarter.

00:41:24.767 –> 00:41:28.267
And then he said, so everyone always assumes there’s a lot of things that are kind of baked in there.

00:41:28.407 –> 00:41:31.207
Like they did this big anthropic deal and they previously on

00:41:31.207 –> 00:41:33.907
the call talked about all this tranium then he said oh and

00:41:33.907 –> 00:41:37.587
by the way that doesn’t include the 100 billion from anthropic and

00:41:37.587 –> 00:41:40.987
it doesn’t include the 200 and something

00:41:40.987 –> 00:41:43.747
billion for tranium and everyone’s like wait a minute

00:41:43.747 –> 00:41:52.227
if we add those in 364 plus 100 plus that that’s like it was like 700 it got

00:41:52.227 –> 00:41:55.507
really weird hotly quiet on the conference call because everyone’s like what

00:41:55.507 –> 00:42:01.087
is going on right here like like it was i don’t even think wall street suggested all that yet

00:42:01.207 –> 00:42:03.587
because it’s like such a big number.

00:42:03.767 –> 00:42:07.547
You’re just kind of like, they almost have a, you know, there’s a world where

00:42:07.547 –> 00:42:11.027
they could have a trillion dollars in backlog, which is just crazy.

00:42:11.467 –> 00:42:17.587
And this is for a business that’s at, you know, doing like 40 billion a quarter.

00:42:17.767 –> 00:42:22.107
So it’s at 160 run rate and they may have a billion dollars of backlog.

00:42:22.347 –> 00:42:23.647
That’s just like mind blowing.

00:42:24.087 –> 00:42:26.567
Yeah. So there was just kind of like.

00:42:28.045 –> 00:42:35.585
And you could hear Jaws hitting the floor on that one. So even after the day,

00:42:35.585 –> 00:42:39.285
the 29th, here a day later, the stock is kind of on a bit of a run,

00:42:39.345 –> 00:42:40.465
which will be interesting to see.

00:42:41.245 –> 00:42:43.985
Another thing that we think usually should be on the front burner,

00:42:44.065 –> 00:42:47.705
but it was on the back burner for this, was advertising. What did you see there?

00:42:48.125 –> 00:42:52.105
Yeah, yeah. Yeah. So they didn’t spend very much time talking about it,

00:42:52.205 –> 00:42:57.525
but it was another very solid quarter on the ad business, right?

00:42:57.685 –> 00:43:02.845
So for the quarter, they sold like $17.2 billion in ads, which is up like 22%.

00:43:03.385 –> 00:43:06.485
So these are very material big businesses.

00:43:06.905 –> 00:43:11.265
And I think people were kind of glossing over, you’re not supposed to talk about

00:43:11.265 –> 00:43:15.505
this kind of growth, this big a business. And I mean, AWS being the marquee

00:43:15.505 –> 00:43:21.865
example, you’re not supposed to be talking about these like 25% growth on these huge businesses.

00:43:22.265 –> 00:43:26.925
So ads continues to grow super fast.

00:43:27.205 –> 00:43:32.265
Their run rate now, if you look at the last 12 months, trailing 12 months,

00:43:32.405 –> 00:43:34.765
they’re at like $72 billion ad business.

00:43:34.925 –> 00:43:41.805
So it’s very rapidly catching up to the digital ad businesses at Google and

00:43:41.805 –> 00:43:45.905
Meta. It definitely is the third largest ad business out there.

00:43:46.105 –> 00:43:50.565
And one huge difference you have to remember between AWS and the ad business

00:43:50.565 –> 00:43:55.865
is the capital expense requirements for those two businesses,

00:43:56.025 –> 00:43:57.385
right? Like AWS is awesome.

00:43:57.645 –> 00:44:03.285
The problem is you’ve got to spend a huge amount of money up front on land and power and ships.

00:44:03.405 –> 00:44:08.885
And then you get this long-term payback on all of those investment years down

00:44:08.885 –> 00:44:14.625
the road. The ad business is almost free on top of the retail business, right?

00:44:14.945 –> 00:44:20.465
And so the profit from this ad business is on a per dollar basis is much better.

00:44:20.645 –> 00:44:24.365
People estimate it’s at like 50% gross margin business.

00:44:24.685 –> 00:44:26.905
I actually think that potentially is conservative.

00:44:27.763 –> 00:44:31.523
And so usually what we talk about is even though the revenue from AWS is bigger

00:44:31.523 –> 00:44:35.423
than the revenue from ads, that the amount of earned income from ads is actually

00:44:35.423 –> 00:44:38.263
bigger than the amount of earned income from AWS.

00:44:38.563 –> 00:44:40.803
And I’m here to tell you that that’s no longer true.

00:44:41.883 –> 00:44:50.023
Like AWS is growing so fast that it now is materially out contributing to the ad business.

00:44:50.023 –> 00:44:54.743
You definitely would want either of these businesses, but I want to say AWS

00:44:54.743 –> 00:45:02.843
contributes like, what did we say, like $14.1 billion in earned income.

00:45:03.203 –> 00:45:08.423
The ad business, if it’s a 50% gross margin, is probably contributing about $8 billion.

00:45:08.683 –> 00:45:16.183
So AWS is almost twice as many dollars to the free cash flow as the ads business

00:45:16.183 –> 00:45:18.703
right now. So that is all super interesting.

00:45:20.023 –> 00:45:24.343
I guess, you know, there’s some interesting things. Amazon mostly used to sell

00:45:24.343 –> 00:45:29.463
ads as sponsored product listings in the marketplace, which is still true.

00:45:29.663 –> 00:45:32.883
But increasingly, they’re doing these interesting data partnerships.

00:45:33.103 –> 00:45:37.903
So they have a huge partnership with Netflix. So you can buy a Netflix audience

00:45:37.903 –> 00:45:42.703
ad on Amazon. And they have a huge partnership with Comcast.

00:45:42.863 –> 00:45:48.563
So you can use your Amazon purchase data to buy digital ads that show up on the Comcast network.

00:45:48.563 –> 00:45:53.103
So it’s, they’re definitely shifting from ads being kind of,

00:45:53.303 –> 00:45:58.583
you know, a core part of their retail business to ads being a standalone business.

00:45:59.883 –> 00:46:03.283
You know, what’s interesting about all this ad stuff, you mentioned that for

00:46:03.283 –> 00:46:07.043
the first time Meta is ahead of Google, like all these ad businesses are accelerating.

00:46:07.303 –> 00:46:11.583
And then, you know, part of OpenAI is an IPO thesis, I think,

00:46:11.743 –> 00:46:16.783
the stuff I’ve seen is they’re going to go from nothing to $100 billion ad business.

00:46:17.465 –> 00:46:20.525
Which, if anyone can do it, it’s them. But then I think, man,

00:46:20.585 –> 00:46:25.885
they’re up against some really crazy competition that didn’t exist 18 months ago.

00:46:26.225 –> 00:46:28.805
So it’s going to be interesting to see, can they carve that off?

00:46:28.885 –> 00:46:33.845
Where does it come from? Is it incremental from offline? And maybe that’s a topic for another show.

00:46:33.925 –> 00:46:34.065
Yeah.

00:46:34.585 –> 00:46:37.045
It’s just fascinating to me how this is going to play out.

00:46:37.205 –> 00:46:41.065
What I think is going to be super interesting is the very different circumstances.

00:46:41.505 –> 00:46:45.805
I’ll call them the incumbents versus the hybrids versus the non-incumbents, right? Right.

00:46:45.985 –> 00:46:49.885
So Amazon, Google and Meta mainly make money from ads. Right.

00:46:49.985 –> 00:46:52.645
So they have a legacy ad business to protect.

00:46:52.965 –> 00:46:55.825
And as all of these new customer experiences come into the world,

00:46:56.045 –> 00:47:00.205
all of these agentic experiences, there’s a huge risk that it will be harder

00:47:00.205 –> 00:47:02.285
to monetize those experiences with ads.

00:47:02.525 –> 00:47:07.665
So those those guys have a, you know, innovators dilemma about,

00:47:07.845 –> 00:47:09.885
you know, how fast they want to move to this new world.

00:47:10.365 –> 00:47:13.185
Amazon is kind of a hybrid, but they got called out.

00:47:13.365 –> 00:47:18.285
That was a question in the earnings call to Andy is, hey, what’s going to happen

00:47:18.285 –> 00:47:22.225
to your ad business when all of this agentic stuff comes true?

00:47:22.505 –> 00:47:27.485
And Andy had to say, oh, my gosh, I think it’s going to be good for the ad business

00:47:27.485 –> 00:47:30.605
because, A, it makes it cheaper to make an ad, right?

00:47:31.505 –> 00:47:35.145
Essentially, their first argument is everyone will have to pay less money to

00:47:35.145 –> 00:47:39.985
Publisus because the robots will make all the ads, right? Yep.

00:47:40.285 –> 00:47:43.805
The cost of the ads is not that material in the whole ad business.

00:47:44.045 –> 00:47:45.705
Right. So I wish it was more.

00:47:46.305 –> 00:47:51.685
But so so that’s an interesting point. But I don’t think it changes the economics for for Amazon anymore.

00:47:51.685 –> 00:47:55.585
And then what Andy was saying is what is interesting is, you know,

00:47:55.785 –> 00:47:59.985
people don’t just do one one agentic prompt and then buy something that there’s

00:47:59.985 –> 00:48:02.785
this bimodal back and forth and

00:48:02.785 –> 00:48:06.365
that there’s a refining and that there’s multiple iterations of prompts.

00:48:06.585 –> 00:48:10.525
And that one of the new things we have in our experience is suggested prompts.

00:48:10.665 –> 00:48:14.065
You give us a prompt and we suggest what your follow up should be.

00:48:14.065 –> 00:48:21.085
And he’s actually suggesting and implying that sponsored suggested prompts may be,

00:48:21.859 –> 00:48:27.199
the, the primary way to monetize ads in the, in the agentic world.

00:48:27.399 –> 00:48:32.359
So I don’t know. I think it’s too early to, to see how consumers use all this

00:48:32.359 –> 00:48:36.179
stuff, but that that’s an interesting thing to watch, right?

00:48:36.359 –> 00:48:39.519
Amazon has some ad revenue to protect.

00:48:39.699 –> 00:48:43.839
And so they have to be a little careful anthropic and open AI have no ad revenue

00:48:43.839 –> 00:48:45.099
or no meaningful ad revenue.

00:48:45.239 –> 00:48:50.099
Right. And so they get to do whatever makes the most sense to make money in the new world.

00:48:50.239 –> 00:48:54.119
And so I just think that’s an interesting sort of different starting point that

00:48:54.119 –> 00:48:55.039
all these companies have.

00:48:57.156 –> 00:49:01.356
The other thing that was exciting to me, and this is going to be a shocker.

00:49:01.516 –> 00:49:02.316
Are you sitting down, Jason?

00:49:02.776 –> 00:49:03.576
I am. I am.

00:49:04.516 –> 00:49:08.236
The agentic commerce was the real star of the show. So AWS was pretty good.

00:49:08.276 –> 00:49:10.676
And then it was outstaged by agentic commerce.

00:49:10.756 –> 00:49:13.036
What is this agentic commerce you’re talking about?

00:49:13.656 –> 00:49:19.476
Well, the flavor at Amazon is Rufus. So it’s our little orange corgi friend there, Rufus.

00:49:20.156 –> 00:49:23.656
And they released a bunch of new data points. This was exciting,

00:49:23.816 –> 00:49:27.096
but they always change them. So there’s never a linear line that you can draw,

00:49:27.256 –> 00:49:28.236
which kind of on purpose.

00:49:28.876 –> 00:49:32.476
So they previously had talked about some MAUs.

00:49:32.616 –> 00:49:36.376
This time they introduced, they said the number of users is up 115%.

00:49:36.376 –> 00:49:41.776
Last quarter, they said there’s 300 million using it, but you can’t tie a line

00:49:41.776 –> 00:49:44.996
here because that 115% is year over year. So yeah.

00:49:45.156 –> 00:49:47.696
And it’s also monthly active users versus.

00:49:47.996 –> 00:49:50.936
Yeah. They’ve obfuscated everything, which is confusing. So,

00:49:51.296 –> 00:49:54.096
but you know, they want you to know there’s a lot of momentum.

00:49:54.736 –> 00:49:57.696
The one that’s maybe more interesting, and again, it’s kind of like they didn’t

00:49:57.696 –> 00:50:02.756
define it, but they said Rufus engagement is up 400%. Now, there’s a third party

00:50:02.756 –> 00:50:06.116
called Sensor Tower, and they put out some really good data.

00:50:06.276 –> 00:50:09.516
And I’m working on a blog post kind of summarizing some stuff there that,

00:50:09.676 –> 00:50:14.576
you know, and there’s a bit of you will cleverly and correctly point out the causality here.

00:50:14.756 –> 00:50:18.416
But, you know, they’re basically pointing out the people rattling through Rufus

00:50:18.416 –> 00:50:19.956
have a super high conversion rate.

00:50:20.196 –> 00:50:25.156
Now, there’s like, that’s the causality. Like, is it, did they already intend

00:50:25.156 –> 00:50:26.516
to buy something when they went in there?

00:50:26.756 –> 00:50:30.996
And it, you know, we, we, unless you did a two audiences, you know,

00:50:31.196 –> 00:50:34.436
and, and you did kind of a double blind kind of thing, you wouldn’t really know

00:50:34.436 –> 00:50:37.356
the causality, but there’s a lot of implication.

00:50:37.356 –> 00:50:43.996
The causality is very strong that these systems are improving the matching of

00:50:43.996 –> 00:50:48.176
the shopper intent to the catalog and resulting in better outcomes,

00:50:48.196 –> 00:50:51.156
which I believe that. I do believe that’s happening.

00:50:51.296 –> 00:50:53.636
It’s kind of a question of how much and are they just picking off,

00:50:53.836 –> 00:50:55.536
cherry picking the best audience or not.

00:50:59.009 –> 00:51:03.409
Well, you’re right. We call it the correlation versus causation question, right?

00:51:03.509 –> 00:51:07.129
Like, does Rufus cause people to have way higher buying intent?

00:51:07.289 –> 00:51:11.009
Or did the people that arrived at Amazon with way higher buying intent,

00:51:11.349 –> 00:51:16.029
were they more likely to use Rufus, right? And the answers, of course,

00:51:16.109 –> 00:51:21.309
somewhere where in between, I think Warren Buffett used to always tell this, what do you call it?

00:51:21.369 –> 00:51:26.809
The duck story about how like the ducks could believe they made it rain if you

00:51:26.809 –> 00:51:29.229
confuse correlation and causation.

00:51:30.109 –> 00:51:36.209
So, yeah, you got to take all of these successes with a grain of salt at the

00:51:36.209 –> 00:51:37.269
moment. But I think it’s.

00:51:38.211 –> 00:51:42.011
It’s directionally true that more people are trying this stuff and they’re having

00:51:42.011 –> 00:51:44.931
good outcomes and they’re coming back and using it more often.

00:51:45.851 –> 00:51:50.211
Yeah. And there’s, you know, so the sensor folks have a, the sensor tower folks

00:51:50.211 –> 00:51:55.011
have like a lot of specifics, but they basically said Rufus users are 60% more

00:51:55.011 –> 00:51:56.931
likely to complete a purchase. So there you go.

00:51:57.271 –> 00:51:59.491
So take a little bit of a grain of salt on that one.

00:52:00.151 –> 00:52:03.591
They did announce a ton of stuff. So there’s eight new features they rolled

00:52:03.591 –> 00:52:06.571
out just right before earnings, which I thought was interesting timing.

00:52:06.571 –> 00:52:09.571
You mentioned they now have sponsored products inside

00:52:09.571 –> 00:52:12.551
of rufus they have sponsored prompts now they have brand

00:52:12.551 –> 00:52:15.191
prompts and then they have this thing i haven’t had a chance to

00:52:15.191 –> 00:52:17.871
try it yet but it’s on my weekend things to do and it’s

00:52:17.871 –> 00:52:20.511
called here are the highlights where if you have a certain type of

00:52:20.511 –> 00:52:23.331
product it will and this has to be it’s let’s

00:52:23.331 –> 00:52:26.311
see it’s on the mobile app and there’s

00:52:26.311 –> 00:52:29.851
only on certain skews so it takes a bit to find it but they

00:52:29.851 –> 00:52:32.611
you can actually have it create if you’ve ever

00:52:32.611 –> 00:52:35.511
used notebook lm it creates a little podcast about the

00:52:35.511 –> 00:52:38.311
product so they announced here that they now have quote

00:52:38.311 –> 00:52:41.511
unquote millions of customers using it and they’ve streamed over 40 million

00:52:41.511 –> 00:52:46.291
minutes of content around that which was interesting and you can actually you

00:52:46.291 –> 00:52:50.311
know a multimodal verbally chat with the product catalog which is kind of interesting

00:52:50.311 –> 00:52:55.291
so you could say you know hey these headphones what is their hiring you know

00:52:55.291 –> 00:52:58.451
you could ask it all kinds of questions there’s also a bunch of people on YouTube

00:52:58.451 –> 00:52:59.731
that are trying to get it to,

00:53:00.011 –> 00:53:04.431
they’ll go pick a embarrassing personal product and try to ask it a bunch of

00:53:04.431 –> 00:53:05.271
embarrassing questions.

00:53:05.411 –> 00:53:08.651
And it does surprisingly good not falling into a bunch of traps there.

00:53:08.791 –> 00:53:12.971
So if you want like some sophomoric humor that you and I would never associate

00:53:12.971 –> 00:53:16.451
ourselves with, there’s a lot of funny videos out there about that.

00:53:19.311 –> 00:53:21.731
What was interesting to me, and this is kind of frustrating,

00:53:22.031 –> 00:53:25.391
is Jassy continues to throw, So this was new.

00:53:25.551 –> 00:53:28.951
He’s now calling Chachapiti and their elk horizontal agents,

00:53:28.971 –> 00:53:29.751
which I thought was interesting.

00:53:30.791 –> 00:53:35.471
And that’s what I’ve been calling him for a while. So obviously it’s from listening to the podcast.

00:53:35.771 –> 00:53:41.071
And he keeps kind of saying they don’t know anything about products.

00:53:41.191 –> 00:53:45.011
They always get the price wrong and all these things. And they can’t tell you

00:53:45.011 –> 00:53:45.711
when you’re going to get it.

00:53:46.091 –> 00:53:49.111
That’s just like essentially not true. So they’re actually pretty good at all

00:53:49.111 –> 00:53:53.071
those things. So I do worry that he lives in his little Amazon bubble.

00:53:53.411 –> 00:53:57.811
And, you know, no one there at Amazon has written a six-page memo to kind of

00:53:57.811 –> 00:54:00.551
tell him he’s wrong on that. So all of our Amazon listeners,

00:54:00.871 –> 00:54:04.291
one of you be brave and write a six pager for Jassy to fix that. Thank you.

00:54:05.551 –> 00:54:09.391
They did also, we teased this at the top. Here’s the big payoff.

00:54:09.851 –> 00:54:15.091
They are in UCP. So that’s really interesting. So the way I would think about

00:54:15.091 –> 00:54:19.051
this is what Amazon has decided to do, and we’ve talked about this,

00:54:19.251 –> 00:54:24.051
is they are blocking all the other folks from crawling them,

00:54:24.131 –> 00:54:25.931
but they are allowing data in.

00:54:25.931 –> 00:54:29.191
So they have this thing called ShopDirect or Direct Shop. I can never get those

00:54:29.191 –> 00:54:30.071
words in the right order.

00:54:30.391 –> 00:54:34.331
And then they have a Buy From Me in there. The Buy From Me is the last remaining

00:54:34.331 –> 00:54:38.431
vestige of a browser-based agentic purchase mechanism out there.

00:54:38.971 –> 00:54:43.591
And Perplexity had one. They’ve replaced that with more server-to-server.

00:54:43.711 –> 00:54:46.031
And then Gemini has done the same thing with UCP.

00:54:46.531 –> 00:54:50.271
I take the signal of them. This is me speculating. This is not announced.

00:54:50.431 –> 00:54:53.191
They did announce they’re in the UCP partnership, but not what they’re going

00:54:53.191 –> 00:54:58.131
to do with it. I think you will be able to buy, there’ll be a new thing. So we’ve had 1P and 3P.

00:54:58.391 –> 00:55:02.351
There’s going to be a new, you know, direct shop or shop direct,

00:55:02.351 –> 00:55:07.451
I can’t remember, thing where you can, you can, using UCP, you can check out

00:55:07.451 –> 00:55:11.111
right on Amazon from brands that don’t really want to sell on Amazon.

00:55:11.311 –> 00:55:15.171
They’re going to pull them in. And what they’re doing is they’re doing an asymmetrical

00:55:15.171 –> 00:55:18.511
information war where they’re going to go subsume.

00:55:18.551 –> 00:55:22.111
I call it embrace, extend, and extinguish. This was a famous Microsoft strategy.

00:55:22.451 –> 00:55:27.931
They’re embracing agentic commerce horizontally so they can get all the UCP inventory.

00:55:28.051 –> 00:55:31.611
So now you’ll have all the Amazon and the UCP, whereas Google,

00:55:31.711 –> 00:55:35.011
who I think they view as their main competitor, will only have the UCP inventory.

00:55:35.876 –> 00:55:40.196
So it’s actually a brilliant strategy because if you believe selection is what’s

00:55:40.196 –> 00:55:46.076
matter, it closes off their flank from an attack on selection by having the

00:55:46.076 –> 00:55:47.736
actual selection that’s all in UCP.

00:55:47.856 –> 00:55:51.356
But it also doesn’t allow a frontal attack because they’re protecting their selection.

00:55:51.576 –> 00:55:55.636
So it’s really interesting from a strategic standpoint to see this play out.

00:55:56.496 –> 00:56:01.516
Yeah, absolutely. I would say on the UCP thing, again, too early to know,

00:56:01.756 –> 00:56:05.576
but I would tend to agree with you. I think they’re going to be consuming a

00:56:05.576 –> 00:56:09.956
lot more UCP feeds than they’re going to be publishing UCP feeds.

00:56:11.156 –> 00:56:15.156
And so, you know, it’s still they’re smart to be in there.

00:56:15.316 –> 00:56:18.356
They’re smart to be shaping it. Right. Like they’re they don’t know what the

00:56:18.356 –> 00:56:21.356
future is going to be. Maybe they will have to sell through UCP one day.

00:56:21.636 –> 00:56:25.836
And it’s in their vested interest to make it a good functional protocol.

00:56:26.176 –> 00:56:33.296
Like for sure, it’s the last draw in like a de facto winner in the in the protocol wars. right?

00:56:33.456 –> 00:56:39.576
Because, you know, OpenAI launched ACP and, you know, all of the ACP partners

00:56:39.576 –> 00:56:41.056
have now moved over to UCP.

00:56:41.256 –> 00:56:46.496
It was a more robust technical protocol just anyway. And now it’s got all the industry support.

00:56:46.656 –> 00:56:52.916
So I kind of look at the protocol wars as a repeat of the beta versus VHS wars.

00:56:53.076 –> 00:56:57.696
And the only difference is in the beta versus VHS, the VHS had all the good

00:56:57.696 –> 00:57:01.396
partnerships, but beta had the technical superiority. And it turns out the industry

00:57:01.396 –> 00:57:04.056
partnerships won over the tech superiority.

00:57:04.456 –> 00:57:11.676
In these protocol wars, both the UCP is the better protocol and it has the better support.

00:57:11.856 –> 00:57:15.676
So it seems like we’re all better off that it won. I do want to go back though,

00:57:16.016 –> 00:57:20.136
on the Andy Jassy stance on horizontal agents, because I think people need to

00:57:20.136 –> 00:57:21.216
pay close attention here.

00:57:21.516 –> 00:57:24.196
You know, essentially what he’s saying is he keeps saying.

00:57:24.893 –> 00:57:29.033
Right now, Amazon does not participate with the horizontal agents at all.

00:57:29.213 –> 00:57:32.033
And he keeps saying, oh, it’s coming. We’re negotiating with them.

00:57:32.133 –> 00:57:33.293
We’re trying to work out things.

00:57:33.453 –> 00:57:37.633
We see a future where we do work with those. But we think we’re going to win.

00:57:37.773 –> 00:57:42.313
We think we know way more about the products and the purchase intent and the

00:57:42.313 –> 00:57:44.853
purchase outcomes than the horizontal agents.

00:57:45.073 –> 00:57:48.453
And customers are just going to prefer our experience, right?

00:57:48.593 –> 00:57:53.213
And so his position is we have a right to win. you’re going to pick Amazon first,

00:57:53.313 –> 00:57:57.673
go to Amazon, and then have an experience on Amazon because we know more about the products.

00:57:57.853 –> 00:58:05.233
And while I agree with you, I think he’s overestimating how bad the product

00:58:05.233 –> 00:58:06.733
data is in the rest of the world.

00:58:06.893 –> 00:58:10.053
Of course, there are problems with product data in and outside of Amazon.

00:58:10.413 –> 00:58:13.873
He’s overestimating how bad it is in the rest of the world, and I don’t think

00:58:13.873 –> 00:58:15.953
that’s going to be the moat that’s going to cause him to win.

00:58:16.703 –> 00:58:23.983
He is right that at the moment, Amazon knows more about that purchase intent

00:58:23.983 –> 00:58:26.183
than likely OpenAI does.

00:58:26.603 –> 00:58:32.583
But what he’s completely glossing over is OpenAI knows a lot more about the

00:58:32.583 –> 00:58:35.283
rest of our life than Amazon does, right?

00:58:35.503 –> 00:58:39.583
And, you know, OpenAI knows what medical conditions we have and that we’ve asked

00:58:39.583 –> 00:58:41.763
about. They know what vacations we’re planning.

00:58:42.003 –> 00:58:47.363
They know what diet we’re trying to get on. And so while Amazon might start

00:58:47.363 –> 00:58:50.203
with a competitive advantage in shopping intent data,

00:58:50.743 –> 00:58:58.463
OpenAI has way more context and context and relevance for the rest of our life

00:58:58.463 –> 00:59:01.503
that impacts what products we might buy and use.

00:59:01.503 –> 00:59:06.123
And so I actually, if I had to bet right now, and I think I said this in a LinkedIn post,

00:59:06.123 –> 00:59:12.443
I think it’s going to be easier for OpenAI and Google to fix their purchase

00:59:12.443 –> 00:59:18.723
intent gap than it is going to be for Amazon to fix its life context gap.

00:59:18.923 –> 00:59:23.463
And so, you know, I think this horizontal versus vertical bots is going to be

00:59:23.463 –> 00:59:27.343
an interesting battle. But if I had to bet right now, I would bet on the horizontal

00:59:27.343 –> 00:59:29.803
agents to win this in the long run.

00:59:30.323 –> 00:59:34.563
Yeah, I agree. Like, even to your point at the top where you went to a Pupilasys

00:59:34.563 –> 00:59:37.403
healthcare thing and, like, Chachupi knows all your health stuff, right?

00:59:37.743 –> 00:59:41.883
Like, who’s going to be better at recommending a medicine for you or, you know?

00:59:41.923 –> 00:59:45.523
Yeah. When I ask for a sunscreen, it knows my kid has eczema,

00:59:45.763 –> 00:59:46.843
right? Like, I didn’t, you know.

00:59:47.323 –> 00:59:49.823
Yeah. Amazon doesn’t know that unless you specifically, you know,

00:59:49.963 –> 00:59:52.503
it picked it out of some prior search thing, which it could.

00:59:52.803 –> 00:59:54.383
But they’re going to start to get…

00:59:55.131 –> 00:59:58.831
They need to elevate and become a personal agent for everything,

00:59:59.071 –> 01:00:03.911
which I think ultimately, I won’t say her name, but A-L-E-X-A,

01:00:04.691 –> 01:00:07.191
you know, I think they’ll have to do something there.

01:00:07.431 –> 01:00:07.751
Yeah.

01:00:08.031 –> 01:00:10.591
And it’s just like really not keeping up with that by any means.

01:00:10.791 –> 01:00:14.771
No, although one tiny tidbit on that particular one, they did have a new data

01:00:14.771 –> 01:00:18.431
point, which is that the plus version, which we all have agreed is much better.

01:00:18.751 –> 01:00:23.111
They’re saying it has 3x the conversion rate that the traditional one did.

01:00:23.111 –> 01:00:25.831
So it is not shocking because the original one was pretty bad,

01:00:25.951 –> 01:00:28.971
but the plus version is apparently selling more goods.

01:00:29.471 –> 01:00:35.171
Good. And then we’re up against time. So I’m going to like just go through this last part fast.

01:00:35.411 –> 01:00:39.231
You’ve probably guessed from the recap at the top, but when you sum it,

01:00:39.431 –> 01:00:43.931
all the spending on AI is just massive. It’s like now 700 billion.

01:00:44.171 –> 01:00:47.831
So it’s getting to be ridiculous numbers, but the backlog is there,

01:00:47.971 –> 01:00:53.051
right? So just, I only spent detail on Amazon’s backlog, but everyone has a

01:00:53.051 –> 01:00:54.251
crazy backlog right now.

01:00:54.391 –> 01:00:57.491
So there’s definitely this wall of spending behind this investment.

01:00:57.751 –> 01:01:01.411
So I think it dispelled this AI bubble notion, at least in my mind.

01:01:02.111 –> 01:01:05.551
Ford guidance for Amazon, they’re always conservative. This was a beaten bracket.

01:01:05.691 –> 01:01:08.171
So even though they like crushed it on earnings and everything,

01:01:08.571 –> 01:01:10.251
they came out a little more conservative.

01:01:10.511 –> 01:01:14.071
They kind of threw, they always do, you know, when they have a great quarter,

01:01:14.191 –> 01:01:17.691
they try to throw a blanket on it so that expectations don’t run away.

01:01:17.691 –> 01:01:21.471
So they talked about memory costs. They’ve got their low Earth orbit thing.

01:01:21.751 –> 01:01:25.511
They’ve got fuel transportation costs. They’ve got a lot going on.

01:01:26.371 –> 01:01:31.071
So, you know, we’ll see. So we’ll be back in a quarter in 90 days and kind of

01:01:31.071 –> 01:01:31.951
let you know how that went.

01:01:32.351 –> 01:01:34.691
Anything else from the quarter you wanted to cover?

01:01:34.831 –> 01:01:35.431
Yeah, the only thing.

01:01:36.691 –> 01:01:40.471
Looking at all of this in its totality, I think the most interesting thing,

01:01:40.591 –> 01:01:46.591
which people are not talking about a lot, is how how little Amazon is talking

01:01:46.591 –> 01:01:48.651
about and thinking about retail and all of this.

01:01:49.491 –> 01:01:54.691
So I know we we live and breathe the agent of commerce piece and and it’s still

01:01:54.691 –> 01:01:58.871
a huge, highly profitable business that drives a lot of other things for for Amazon.

01:01:58.871 –> 01:02:05.131
But the two stark things for me, Andy Jassy does an annual shareholder’s letter

01:02:05.131 –> 01:02:07.051
that he took over from Jeff Bezos.

01:02:07.211 –> 01:02:10.651
And this was this document that I used to look forward to that was super insightful

01:02:10.651 –> 01:02:11.691
and interesting every year.

01:02:11.891 –> 01:02:17.311
This year’s earning annual letter that came out last month did not mention retail once.

01:02:17.971 –> 01:02:24.391
It was exclusively about these new businesses at Amazon. And then in their earnings

01:02:24.391 –> 01:02:26.631
call, it’s a 60-minute call.

01:02:26.811 –> 01:02:30.271
40 minutes of it are content and then 20 are Q&A.

01:02:30.531 –> 01:02:34.851
Do you know how many minutes they spent on retail in that 40-minute upfront

01:02:34.851 –> 01:02:36.871
section? Three and a half minutes.

01:02:37.271 –> 01:02:39.431
Oh, did you have a little retail geek here?

01:02:40.091 –> 01:02:44.171
No, I’m okay with it. But because here’s what I think is funny.

01:02:44.391 –> 01:02:48.951
Like on this podcast for years, people are always, who’s going to disrupt Amazon?

01:02:49.111 –> 01:02:55.451
What’s going to disrupt Amazon? And five years ago, my answer was potentially

01:02:55.451 –> 01:02:59.871
their other businesses get so big that retail just becomes immaterial and they

01:02:59.871 –> 01:03:01.131
stop paying attention to it.

01:03:01.931 –> 01:03:05.911
And I feel like that in some ways is happening. It’s still a huge business.

01:03:06.111 –> 01:03:09.651
If they stop paying attention to it in its entirety, it would take a long time

01:03:09.651 –> 01:03:11.591
to depreciate and wind down.

01:03:11.771 –> 01:03:16.071
And I’m not saying they’re losing all momentum. I mean, their growth rate is

01:03:16.071 –> 01:03:19.831
accelerating at the moment, but what I am saying is as a

01:03:20.239 –> 01:03:27.039
percentage of the attention for the CEO, we may have passed the moment of peak retail at Amazon.

01:03:27.379 –> 01:03:30.959
And so I suspect that Amazon is going to get less cycles from Andy.

01:03:31.099 –> 01:03:34.939
Retail is going to get less cycles from Andy Jassy every quarter for the rest

01:03:34.939 –> 01:03:41.199
of time and less cycles from their board and less cycles from their S team than ever before.

01:03:41.239 –> 01:03:47.319
You know, just by virtue of how big and exciting these other established businesses

01:03:47.319 –> 01:03:52.499
are and how big and potentially big these two or three new businesses are.

01:03:53.459 –> 01:03:57.259
Yeah. So I can’t remember if it was this quarter or on some things.

01:03:57.759 –> 01:04:01.179
He’s kind of started, and his background is from the AWS side of things, right?

01:04:01.239 –> 01:04:06.399
So this is kind of a natural progression, but he’s kind of, his framing is like,

01:04:06.519 –> 01:04:09.719
he kind of says the retail, the store, he calls it the store.

01:04:10.139 –> 01:04:13.579
He’s like, the store is one of our bigger customers on AWS is kind of like how

01:04:13.579 –> 01:04:17.099
he thinks about it. So it’s kind of gone from the engine pulling the whole entity

01:04:17.099 –> 01:04:22.259
forward to like one of the many customers of AWS and he calls it the store. So it’s kind of funny.

01:04:23.139 –> 01:04:23.499
Yeah.

01:04:23.659 –> 01:04:25.739
The first time he said that, I was like, what store is he talking about?

01:04:25.899 –> 01:04:26.939
And I was like, oh, the store.

01:04:27.119 –> 01:04:27.999
Capital T-H-E.

01:04:28.159 –> 01:04:32.079
Yeah, the store. Yeah, that’s a pretty big honking store you got there, Andy.

01:04:33.539 –> 01:04:36.739
So, yeah, so I thought that was an interesting framing that it’s just basically

01:04:36.739 –> 01:04:40.159
yet another customer of AWS over there just doing his thing.

01:04:41.199 –> 01:04:41.559
Yeah.

01:04:42.359 –> 01:04:46.399
And so the other lightning round things you want to hit on before we call it a day?

01:04:46.639 –> 01:04:49.919
No, I think we’ve used up more than our allotted time, Scott.

01:04:50.099 –> 01:04:53.639
So as we always say, if you found value in this, we sure would appreciate it

01:04:53.639 –> 01:04:55.719
if you jump on iTunes. They still accept reviews.

01:04:55.899 –> 01:04:59.859
Believe it or not, 12 years later, you can still still write a favorable review

01:04:59.859 –> 01:05:01.019
of the Jason and Scott show.

01:05:01.559 –> 01:05:05.259
And if we get enough reviews, maybe we’ll do more frequent episodes.

01:05:05.839 –> 01:05:08.879
Yeah, they’re actually hard to find. So think of it as a mental puzzle to see

01:05:08.879 –> 01:05:12.939
if you can figure out how to leave a review on Apple Podcasts.

01:05:13.019 –> 01:05:14.639
They’ve hidden it, so good luck.

01:05:15.019 –> 01:05:18.619
Yeah, and until next time, happy commercing.