The Six Five team discusses Amazon Q2 earnings.
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Transcript:
Daniel Newman: Well, first of all, I mean Amazon, it was a miss on revenue, narrow. I mean, God, terrible company, only did 148 billion of revenue in a quarter. They were supposed to do 148.8 by the way. They beat on earnings, had a good earnings result, they beat on AWS. That was a good number because that was the number that on Microsoft, everyone cared about. So you would’ve thought that might’ve kind of buoyed the company a little bit, but they had a little bit softer guidance, which again, sort of fits the theme that we are heading into somewhat of a recessionary pressure. It’s kind of interesting as the election comes, now all of a sudden, I thought we were supposed to hold this crap together until the election was over. So I don’t know how they’re planning to do this, but maybe there’s a rescue decision that’s going to come and get everybody really excited. Pat, I’m going to prognosticate. Hold on.
We’re going to have a rate cut. We’re going to have a rate cut now. It’s going to happen. Rates are going to come down now. Jobs are imploding. The market’s imploding like, okay, now can we cut rates? So that’s going to happen. If that’s good, that means inflation, I don’t know, we’ll see what happens long-term, but maybe we finally beat it to some extent. Just don’t go to the grocery store or try to buy anything. Pat, two things, two notes, because I know we’re running out of time. You got to get rolling. The cloud performance is good. AWS has a big mission ahead of it to prove it is not a third player in the public cloud for AI. That’s the big mission the company has. And even notes, there’s rumors or some confirmed rumors of Andy asking what the heck happened. So Andy’s basically, as I had speculated about the decision to move on from Adam, there was some contention about how the company handled its transition into AI and the AI cloud has flipped the rankings, not the size of the businesses, just the rankings of the businesses and AWS is pissed.
Andy is pissed. That was his baby. He wants to see that company on top of AI. They have work to do. That’s the area they have to prove. And so by the way, it’s something I think you and I will be digging into quite a bit over the next few quarters, where will this kind of play out in the end? Because AWS has the infrastructure. They have SageMaker, they have Inferentia, they have Trainium, they have Titan. Just work to be done to prove they can keep customers on it for AI. Advertising missed, but advertising is now a 50 billion business for them. People don’t think about them for that, but that’s a massive revenue stream for the company. But again, did not grow fast enough. And Pat, I’ll kind of wrap up by saying this. Very sturdy, diversified business, their retail business has actually seen its margins almost double. It’s down a little bit quarter-to-quarter, but double from a year ago, which is a huge thing. They’re making more money, they’re delivering more profit, but yet from a value standpoint, they’re, from what I’m reading and I need to assess this a little bit more, we’re not the equities guy, but it looks like they’re valued about where they were in 2020. So all the growth they’ve done for four years has not actually given any more value to the market, which is pretty interesting because to me, I think the company’s improved its margins, diversified, and performed pretty darn well.
Patrick Moorhead: Yeah, great analysis there. I’m just going to add a little bit of color on your very astute comment about AWS and generative AI. And there’s a holistic way to look at that, meaning how, and I think a lot of people are comparing the company to Microsoft that has both enterprise and consumer capabilities. Where is generative AI making more money for Amazon.com? The media businesses, their massive home electronics business with things like Alexa and Fire TV, and then of course AWS. And AWS has been a pioneer in so many things. I mean, they invented IAS at scale and they’re used to creating markets and then staying ahead. I do believe that they got a little bit, I wouldn’t say surprised, of course they knew about generative AI, but right now they are really, I think, need to be very loud and proud about its customers, the benefits that they’re deriving from generative AI and also being able to paint that company-wide picture.
Because if you can’t get tons of customers to go on the record and talk about all the benefits, then maybe get Amazon.com or get Panos on the devices side talking about how Amazon generative AI is the best thing since sliced bread. I also think there’s a lot of competition out there for homegrown silicon. AWS was the pioneer of that. We now have Google and Microsoft who by the way for that matter, Meta, but they don’t compete with Meta, building their own silicon. How does the performance look? We now have a competitive market and I think measurements between let’s say Graviton and Maya would be interesting. Or Trainium in Maya, sorry, sorry, I meant Cobalt and Graviton. But anyways, you guys get the picture. It’s a different market and I think that Amazon would serve itself well. And I do think they’re motivated and I do think they’re energized to get that message out.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
