Thread by @borrowed_ideas

1/ Thread: $AMZN 3Q'21 Earnings Update

This call was the poster child of all the current macro hot topics (supply chain, labor constraints, inflation etc.). AMZN, ex AWS posted loss after quite some time.

My notes from the call.

2/ First, here’s the breakdown of revenue by segment (both product and geography)

3/ While AMZN bears raise their eyebrows with "slowing" growth, 2-yr and 3-yr CAGR depicts better underlying health because of the unusual last year.

I don't quite see much of a slowdown on 2-yr basis. AWS growth remains "size unconstrained" and ads continue to marvel.

4/ I know, I know SOTP doesn't work, but boy I wonder what multiples AWS ($64 Bn run-rate) and the ad biz ($32 Bn run-rate) would trade in this market, considering no sign of deceleration in growth rate, market size, and profitability.

5/ Labor constraints, wage inflation, and supply chain issues cost $2 Bn in Q3. AMZN expects these issues to contribute rise in costs by $4 Bn in Q4.

avg. starting wage is now $18/hr with an additional $3/hr depending on shifts and sign-on bonuses up to $3,000.

6/ "for the first time since the pandemic began, we are no longer capacity constrained for physical space in the network"

"we are on track to double our fulfillment network over the 2-year period since the pandemic's early days."

7/ "our percent of units that we deliver through AMZL is over 50% of our units globally."

"we think that the growth will be suppressed for the 4 quarters that end middle of Q2 next year"

8/ "for the foreseeable future, our capacity constraint is actually labor, which is new and not welcome...we are hoping that rectifies itself through Q4 and into early 2022."

"we have unfinished business on the 1-day promise side"

9/ AMZN posted loss in international after posting profit for a couple of quarters. Some explanations here why.

10/ On AWS: "the margins are going to be -- they are going to fluctuate over time. There's a lot of moving parts. There's a lot of extensions of contracts and long-term commitments, which are great for our business and great for customers. So there's negotiated long-term deals"

11/ "We're very bullish on the retail business. In fact, it's impossible and not productive to even try and separate advertising from third party from retail. It's all, to us, part of a flywheel where we service customers."

Currently absorbing costs to not affect customers.

12/ "on the labor front, there, we estimate about half of the cost is permanent base wage, the other half is in incentives that we currently offer to attract workers."

13/ Same day delivery now in 15 cities.

"we're well on our way to providing ultrafast delivery for things that require ultrafast or things like groceries and others, and we see that expanding. But there will be room for multiple winners in the space."

End/ Outlook: topline growth ~4-12%. Tough comps.

Big tech earnings is done. I will cover $IAC, $TRUP, and $SQ next week.

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