Amazon 2Q15 Earnings Call Notes

Ramping investment in India, because when we see a positive surprise, we double down

“What I can say about India is when we see a positive surprise we double down on it. That’s kind of our policy, and India is that kind of surprise. So we’re very happy, very encouraged early on with what we’ve seen in the ramping of the business, the level of invention going on for both customers and sellers. We are over $25 million or excuse me, 25 million names (14:02) which is the largest online store in India. And we continue to improve pricing and fast delivery so were super excited about India. I will not get into specific investment levels right now but we continue to ramp up our investment there.”

Admittedly, profits are lumpy, but we’re investing in businesses that can generate high return on capital

“If you saw our shareholder letter this year, I think Jeff Bezos put it really well. He said we’re going to look for things that are important to customers, customers love them, businesses that can grow to be a large size that can generate a high return on invested capital and are durable and can last for decades. So we will continue to invest in the businesses we think fit that profile and we’re always looking for a fourth or fifth business that fits that profile. So as far as lumpiness, admittedly it is lumpy and we will continue to work on both those tracks going forward.”

We lapped the Japanese consumption tax increase from last year. That helped

“International was up 800 basis points and half of that you remember we’ve spoken about the impact of the Japanese consumption tax that was instituted last – April 1 of 2014. It had a measurable impact on our run rate, our growth rate last year particularly Q2. And so we are lapping that, which sequentially makes up half of the 800 basis points sequential gain.”

North America operating margin up gaining efficiency

“So let me start with North America. 5.1% operating margin was up from 3.9% in Q1 and 3% last Q2. You hit a nail on the head. A lot of it is the top-line growth, but it’s also a lot of the efficiency we’re seeing, particularly on the fulfillment and marketing lines, which for the whole company were flat year-over-year on a percent of revenue basis. So we are getting very good top-line growth. A lot of that is fueled by Prime adoption and we are dropping a lot of it to the bottom line with many of the efficiency projects.”

Amazon is one of AWS’ largest customers

“What I can tell you is we have seen great efficiency on the cost side, the cost to generate the capacity for AWS. I will also say that Amazon is one of the primary large customers of AWS so we see it in the consumer side of the business as well, although that’s not included in AWS revenue. It’s an inter-company relationship. So, we get a double whammy there. We are getting great efficiency from our external AWS business but also from our own use of AWS services.”

Pleasantly surprised with the job that’s being done by the robotics team

“On robotics first, we don’t have any new numbers to share with you, but we’re super excited with the progress of that business. We had very high expectations for Amazon Robotics and its impact on our warehouse cost structure and we have been very pleasantly surprised by the job being done on that by that team”