- Amazon reported Mar-18 results highlighted by profitability that was 2x analyst expectations.
- Recall that from time to time Amazon will flex its gross margins to remind investors of the model’s leverage potential. Going forward we expect margins to dip lower as the company continues its aggressive investment pace into fulfillment, lower AWS pricing, and content.
- Retail growth of 22% y/y was consistent with growth over the past two years. More room to go given the company added ~15m Prime members in 2017, which will drive spending in 2018. Prime members spend 3-4x more on Amazon than non-Prime users.
- AWS growth accelerated for the second straight quarter to 49% y/y, compared to 45% y/y in Dec-17 and 43% y/y in Sep-17. Cloud is still a nascent market and AWS is a killer platform that should yield favorable growth going forward.
- The company also announced a 20% increase in the price of a Prime membership. This should yield about $2B per year in incremental revenue that will most likely be reinvested in the business, and occasionally allow the company to flex its profit margin muscle once again.
The $50B automated retail opportunity. In 2016 there were 3.5 million cashiers in the U.S., according to the Department of Labor, with an average salary of $13,574, according to Data USA. That makes for a nearly $50 billion opportunity in cashierless retail that Amazon is well positioned to attack. Of those 3.5 million cashiers, 323,000 are convenience store or gas station employees, or 9% of the cashier workforce. The automated retail space is getting more and more crowded, but the Go store suggests that Amazon has the pole position.
Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.