EP338 - Amazon Q1 2026 Earnings

Welcome to the Jason and Scotchow, your source for the latest news and trends in the e-commerce industry. Featuring host Jason Retail Eat Goldberg, Chief Commerce Strategy Officer at Public Says, and Scott Wingo, CEO of GetSpippy and co-founder of Channel Advisor. Here are Jason and Scott. Welcome to the Jason and Scotchow. This is episode 338 being recorded on Friday, May 1st. 2026, I'm your host Jason Retail Eat Goldberg, and as usual, I'm here with your co-host, Scott Wingo. Hey Jason, and welcome back. Jason, Scotchow listeners. Jason, shop talk was weird. It was, what's the Disney movie where they trade bodies and stuff? I felt like that was it. You know how you're like? Yeah, Freaky Friday, that's right. Blacky Wednesday, Freaky Friday, it's all the same. We're recording this on a Friday, so that's good. Because you always say there was a period of five years I didn't go to shows and you're like, "All everyone does is ask me where you are. It's getting kind of old." That was my role at shop talk. So I was like, "Why is Jason oh my god, where is he? You guys are never together." And I had to break the news that you were on spring break. So hopefully you had fun. Hopefully your sunscreen that you introduced us to at NRF held up and all the fun was had on your spring break. We missed you at shop talk, but it was really, it was more show for me because it was all about a gentick commerce. Yeah, yeah. Yeah. I was grateful for you and everyone else keeping me abreast because I did have some FOMO and I'm glad you didn't find out that all those people that were asking you where I was were paid actors, I hired to hand you. Yeah. Or maybe you just double paid them to make me kind of like prove a point. We'll never know. Yeah. Yeah. Mysteries of the Earth. Yeah, you went freaky Friday. I was thinking more like stranger things upside down world, but okay. Okay. Yeah. A little scary. We want to keep this super derated soon. No PG themes here on our podcast. Yeah. Although there's an animated version of Stranger Things that I am now watching with nice on stuff. Give me a spoiler free thumbs up, thumbs sideways, thumb down. Thumbs up. It's. I was the concept is between season two and season three of the TV show, there was a gap. There was a gap year, which I'd forgotten about. And so this is an animated series that fills in the gap year. And so it jumps right in like it was a little abrupt for my son because he didn't you know who who 11 was for example, but yeah. He caught up and he's toy into it and it's because it's animated. It's slightly less scary. I would argue the first couple seasons of Stranger Things were probably okay, but it started to get like a little more intense. Yeah, the first season. Oh, okay. I don't have spoilers. But there's the first season freak my daughter out. Okay. She was probably older at that point than your son is now. So the running down and getting an elevator scene, you remember that? I do. Yeah. Now they're out. Yeah. Yeah. Jump scares still get to him sometimes. So. Yes. I don't know if that's what it was. Yeah. Well, we're going to stick with the animated series for now. Okay. So that was good. And I don't know where you're going next, but I'm on my way next week to the vendor's saucify. This is over on the branded manufacturer side. They're a PIM. They hate to be called a PIM. But everyone calls them a PIM. They're they do a show called digital shops on it. So I am speaking there and I'll see a lot of our favorite folks. The series is going to be there. Scott Ogginsman from the Amazon world. And yeah, I'm really looking forward to that. That'll be a lot of fun. And going to do an attempt to workshop where in real time I analyze people's digital commerce strategy. So let's see. It'll either be wildly entertaining or a train wreck in which case they'll also be entertaining for everyone. But me. So. Yeah. Yeah. We'll see how that goes. So I have been to that show before. So that is great. I'm going to talk about that. We have to learn all Spanish for that one. Are you going to -- No. I'll just use Google Translate to live. Live Simul Kassmi. Oh, neat. That'll be interesting. Yeah. Let's hope it doesn't throw anything weird in there. Yeah. That's, of course, not true. It does remind me of it. I do some things in Brazil occasionally. I showed up at a big event in Brazil. The Translators were waiting for me as I walked in and they were a hersel. They met me at the door. And they're like, "You're Jason Goldberg, huh?" And I'm like, "Yeah." And they're like, "We've been watching your videos on YouTube. You're going to be a problem." That's flagged. Apparently Portuguese is a slow language that takes a little longer to say things than it does in English. And I say a lot of things fast. So. Very cool. Yeah. And then are you ready? I'll go ahead. Good. I was going to -- I don't know if you're through with your update. But I was curious what you think about Amazon moving Prime Day this year. Is that going to mess up all your data? Yeah. So it is a data problem. So for folks that aren't in the know, I want to say 2021 Prime Day might have been in June. But since then, 2022 through 2025 Prime Day was in July -- mid-July usually. And then they just announced they haven't given us an exact date. But they said it's going to be in June this year. And so one Prime with that Prime is on. That means it falls in Q2 instead of Q3. So in all these earnings calls, when we're looking at year over year comps for quarters, that's going to be a -- that's a major impact that they'll call out. But also, you know, for all the vendors, Amazon doesn't give you a lot of warning to prepare for Prime Day and to get your inventory ready. You get your offers ready. And so people kind of proactively plan on their own, assuming it's going to be in July again this year. And so this did cause a little bit of a panic for a lot of big three-piece sellers that are now kind of rushing to pull their plans forward to be ready a little earlier than they were expecting. Very cool. Where do you -- more importantly, what's on your buy list? Yeah, I haven't even thought of what I need. You know, frequently I replenish a lot of like cables in charging accessories. And my wife has banned me from making anymore cables into that house. So, may not be -- may not be a big year for that. You should get an Apple device to run all your agents. So I would, but the Apple device I would like to get from my agents. I feel like I need a rack of Mac minis. And Mac minis are very constrained right now. They are. I'm sure in Chicago there's not a single one around here, but they're sold out here as well. Yeah. And so I don't know that that's going to be a big -- I mean, we'll see if they get their supply chance to run out by June. But may not be available yet. I don't think they will. And they're saying memory is going to be a bigger problem. Yeah. We'll talk about memory in a little bit. This is so today we're here to talk about Amazon's Q1 earnings. I thought I would go through a little bit of a setup. First of all, it was like the most exciting day for nerds like us ever. The first time ever, four of the Mag 7, the Magnificent 7, companies, and the four we care about the most announced on the same day. So it was not only the same day, but the same after market hour. Someone told me all three pressure releases hit within 70 seconds of each other. CNBC was like all blowing their mind. They had to bring in all the extra hands. It was all hands on deck. The same here at the Jason Scott Show headquarters. We had our whole team alerted to this and watching it very closely. Yeah. I want to slightly point out. You're the one geek that was super excited about this. Everyone else that covers all these earnings calls, it was super drumpy about this. It was a fun challenge to see. Could you process this information as fast as it was coming out? Yeah. But my heart does go out to all our friends in the equity analyst base because they did a lot of human work that. Yeah. We've had a lot of them. Gene Monster, Mark Mahini, Colin Sebastian, all of them cover these names. It was kind of frenetic for them to get everything out. Here's the setup. We'll go through this pretty quick. Microsoft was kind of the first. They all released at like four o'clock. They dropped their pressure. These are like 402. Then they have, they always give it 30 minutes and then they start to conference balls. Microsoft was first technically because I think they started at 430 and then there was some at five and some at 530. Azure did really well. They didn't talk any about it into commerce. So that was kind of boring. So I would kind of rate from my perspective, Microsoft was the worst. But it's really freaking a lot of people out. You remember this from our Q4 recap? Is all this spend on AI? And Microsoft's Azure did really well. It didn't really beat. It was like what you would call it beat in brackets. They slightly beat for their calendar quarter. And then Microsoft to make it confusing is actually Microsoft's Q2 announcement. But everyone else was Q1 because they have a different fiscal. They're on a calendar quarter basis, but their fiscal is off by a quarter. And I know Walmart and a lot of the retailers are like, not even on a calendar and like the whole thing. It's like they don't even fall in normal quarterly boundaries. So we won't distract from all that. So it was pretty good, but what freaked everyone out was their CAPX guide. They had guided previously that they were going to spend $160 billion this year. And they're like kind of casually, yeah, we're going to need to raise that to $190 billion. And it was like, whoa, that's $30 billion more. They talked about half of it being due to component cost to your point about memory. All this, this investment in AI has outrun the ability of factories to make enough memory chips. And then the very specific high speed memory, which is also what goes sadly into the MacBook Minis studios and other items. So, yeah, that's a, just causing a huge supply problem there. Memory again, we should brand that. And then the other half though is coming from this just a mince wall domain into their seeing for what they're doing. They announced everyone's using these new vanity measures around token generation and consumption. So there's was their customers are now consuming over a trillion tokens a year. And that takes out all their internal like copilot and all their internal token generation. So that's just third party customers just chewing up tokens like crazy. And then we pivoted to meta, also known as Facebook. They're interesting because all these other companies, these hyperscalers, they're called their investment. And then there's a direct tie to so they invest X and you can see why come out in revenue in the cloud computing part of the company. And then there's some ancillary gain in the other part of the company. Meta is a little bit more, it gets washed through so they spend all this money and then it comes out in advertising gains. And it's hard to kind of like tell what was AI and what isn't. But their advertising business is accelerated pretty materially. It grew over 24% year over year and they launched their new models and they those were pretty well received. They're like number five and six on the leaderboards now. So they're competitive but not amazing. They did spend a lot of time talking about agent to commerce. We don't have time for this, but over on retail, Gen. I actually clipped the five minute answer that Zuckerberg gave about their vision for where they see this going. And it's really interesting to listen to he kind of he kind of leaned in and said that they basically have a right to this because they have so much data. They know all about products and what buyers want and that they think they can have do something. Quote them quote really special in shopping. So be interesting to see because and that Wall Street analyst made me think of you, they kind of said, hey, you kind of tried this before and didn't abandon it. And his answer to that was, you know, kind of like the time is now. We think we can actually solve this in a way that's unique that we never could before. So I thought that was an interesting little little piece there. Did you get anything from Microsoft and Meta? You want to throw in the mix? Yeah. So I mean, mainly on the metaside, hey, I'm excited that they're excited. I, you know, I have a healthy dose of cynicism from past efforts, but I do agree. They have a ton of valuable context and the the marquee thing on that, that ad growth, that acceleration of digital ad growth is they actually surpassed Google for digital ads and Q1, which is the the first time that's ever happened. You know, you should think about the whole ecosystem. A lot of that is on Instagram and WhatsApp. It's not like ad growth is exploding on Facebook necessarily, but it's pretty interesting. And you know, there's a lot of commerce intent that still happens across those platforms. So I do think they have a right to win if they're able to get the execution right. So I hope they try some cool stuff. Yep. And then they previously had guided to 125 to one, they kind of give a range of cat-back. So they did 125 to 145 billion. That was what they actually stated going forward. And then previously they had done 115 to 135. So they nudged it 10 billion. So not nearly as much as Microsoft did. But while she's having a hard time, so they were really concerned with Microsoft, also Microsoft lost exclusivity on the OpenAI and or they traded it away. We'll talk about where it went here in a minute. But you see, they were the only place you could go. Azure was the only place you could go to get basically run OpenAIM Eyes model, which is one of the most popular ones with startup. So that's what we use at ReFi Buy and whatnot. So there was a little bit of an egg three year round that. I was kind of a surprise. And then a lot of people are kind of scratching their head on like that big 30 million dollar bump. And then with Meta, they're having a hard time kind of like believing the story that it's driving all this ad. And there's a little bit of a wait and see on these new models that are coming out with and also a jump to commerce. And then Google came out and they just absolutely crushed it on every dimension you can imagine. We could do like a two hour podcast just on this. But they're YouTube grew faster than it ever has. Their ad stuff has gotten so much better. And then I was pleasantly surprised, but Sundar has definitely gotten religion around the gentick commerce after NRF. They actually tracked these mentions and they were close. I thought for sure they were going to win because they mentioned five or six times talking about UCP and a gentick commerce and the prepared remarks. I'm sure the pressure release prepared remarks and then Q&A. And then they got beat handled by someone we'll talk about a second. So that was exciting for me from that lens. Their vanity metric is token volume also, but they talk about they always they always change it to which is frustrating. This time they talked about they generating 10 billion a minute to the API. And then they Gemini has grown 3X from just last quarter and daily token generated. This been a lot of time talking about UCP. We'll talk about that in a second. And then they guided their capex up. Let me get that number here. It's hard to pull this stuff from all over the place. So they had prior, they, you know, if you boil it down, they basically did a $5 billion bump. So of the increases, they were the least. Well, Amazon spoiler was unchanged because they had put such a big number out. But yeah, so, so that was really well received. Plus, so they did what's called a beat and raise. Whereas I would say, Netta and Microsoft were beat bracket, meaning they beat for the current corner. And then in the future quarter, they kind of bracketed where Wall Street was. It kind of came in line with with where Wall Street does. And that's see, that was that was the setup. So that's the setup. The thing to watch for Google is we do have Google IO coming up in mid May. And I'll be at that. So that's exciting. I forget to mention that at the top. So I had an invite to go to Google IO, never been there. It's always been on kind of one of my conference bucket list. So I can go hang out with all the Google nerds and see what they're going to be doing around agent to Congress. So I'll report back on that. Very cool. I'm going to expect a special report just on the cafeteria. Oh, yeah, we actually are in some Google building. So I've been to the Google cafeteria and I can tell you it's going to be lavish and crazy. A lot of food at oner stand. I'm a simple guy. That's awesome. Yeah. Yeah. And Scott, you teased something about UCP. Yeah, so that brings us to the main event, and it wouldn't be the Jason Scott show without a little bit of Amazon news. Yeah. So obviously people probably tuned in here because they're used to us talking about Amazon quarterly earnings. We made you pay a horrible price with all that precursor stuff. So spoiler alert for any of you that just care about the Amazon equity, it was a wild ride. It opened down like 4% after hours. And then when trading started up next day, I think it bounced back up 4%. And so that plus to minus 4% swing on a almost $3 trillion market cap company, that's ginormous. That's like $200 billion in value, like coming and going in a single day. So if you're someone that pays attention to this stuff day to day, which I would not recommend, that was probably anxiety-driven. The top line is that AWS is killing it. They basically, from an operational standpoint, it was a beat and bracket. They beat every number. They were a little more conservative on their projections. But I think what drove that swing was that they did well on all their numbers, but they also said that, "Hey, the enormous cap expending is going to continue for the foreseeable future." And so I think investors are having a lot of anxiety over the eye-watering investments that all these companies are proposing making in order to win this future agentic market. Yeah, it was really interesting to watch the after hours. There was so much that people that know how to adjust it, like they have. Amazon was already complicated. You got a retailer, a cloud computing, and then listeners know there's actually a marketplace in there. There's an ad piece, and we talk about that. They have the devices and other stuff, but that's kind of fallen to the side there. Now it's kind of like, so that's like four big things. There's a fifth thing now, which is all this AI stuff. They are now a hardware chip. They're now basically competing within videos, so that's like a sixth thing. Then there's a seventh thing, which is they're now a satellite company. It's just like everyone's like, it kind of reminds me of GE, where there's so many pieces that are hard to consume what any of it means when they drop their press release note. They've gotten longer and way more complicated. Yeah, so it just takes a while for everyone to kind of like to just like, "This is good, are bad news? What is going on inside of this thing?" But because you are Jason Scott-Shodillist, we're going to peel the onion and kind of for the retail lens, we're going to share what we saw that we think was most interesting. Let's start with headline numbers. So Jason mentioned it was a beat and a bracket. Revenue was up 17% year on year, which was great, which really kind of crushed consensus. Consistis was about 178 billion, and they came in at 181.5. That's a nice clean 3.5 billion beat, which is, yeah, not too shabby. I don't know Jason, do you usually exceed your family budget by 3.5 billion on the Revenue set? Only on the spending side. Dang it, me too. It's because of Prime Day. We can blame it on Prime Day. Every day is on Prime Day at my house Scott. Amazon, maybe you contributed, oh, and they actually said, "Thank you to this guy in Chicago that contributed to that 3.5 billion." Yeah. Doug, you're welcome. Yeah. And then Starbucks probably had a call out for you. The operating income, a surprise to the upside. So it was all time record, which is kind of not that big of a deal because they've just been chugging on that. Consensus was 19 billion, and they came in at 24, which is pretty amazing on the income side, and all that flowed through to EPS as well. So everyone was expecting with all this capex and investment that the profit numbers would be under pressure. So everyone was kind of perplexed by how this could happen, but we're going to actually peel that apart and review what's going on inside of there, starting with the retail org. Jason, you want to take that? Yeah. So for those of you that are newer listeners, Amazon actually started out as a retailer. I know that'll be surprised. Yeah. They sold books, do you remember that? Yeah. Those are blogs that used to be printed on papyrus. And I believe their first mission was to be the world's largest book seller. That's when we started the podcast. Yeah. Our own papyrus. Our own papyrus. To papyrus. To papyrus. To papyrus. Yeah. Yeah. So today when they talk about retail, it's really complicated because they talk about their income numbers and their sales numbers, which are not perfectly analogous to how much goods they sold. Right? So we often talk about this hybrid number that we call gross merchandise value, which is, hey, forget the fact that some stuff Amazon sells they own and they take credit for 100% of the sale. And a lot of the stuff they sell is a marketplace and they take a commission on that. So when they talk about their revenue, they're adding their full cost of the goods they own and they're adding the fees they charge on the goods that other people own. And so those numbers are interesting to look at on a comparative basis. Did they go up or down from last quarter or last year? They're not helpful to say how did they do versus Walmart or Best Buy or some other retailer. And so on all those numbers, of course, they performed very well. Like they're North American revenue was $104 billion, which is up 12%. Last quarter, they were up like 8%. So it's an accelerated growth. International drew even faster, which international is a younger, less mature business. So they're about 40 billion in international drew like 19%. And so they generated better margins than they traditionally do. They're income ended up at like 8.3 billion. But we like to estimate that GMV number, right? And so Scott, I used to go based on an estimate you published. And then we started calculating it. Now the analysts do a really good job. So both Morgan Stanley and Citibank have these really sophisticated models that I borrowed from and kind of their models basically agree on US GMV. So US GMV for Q1 was probably up about 10.6%. So to put that in perspective, the US Department of Commerce says that core retail, which is kind of a similar set of services to Amazon retail core retail for Q1 was up 4.75%. Amazon is the first or second largest retail in the US, depending on how you want to count. And their core retail business was up 10.6%. So more than they're amongst the two biggest companies in the industry and they're growing it more than twice the rate of the industry average. So that is your marquee takeaway about how the retail performed this quarter. Yeah, if you, you and I always use kind of we collaborated on a chart that was kind of tracking win-win Amazon's GMV pass wall mart. I think they passed each other a long time ago right from that perspective, but not. But as total revenue hasn't total revenue actually gotten close to you? Yeah, total revenue is getting close, but the both of them have sway, not apples to apples number. So I would argue like for a long time, it was, oh, we're they're passing the non grocery revenue at Amazon at wall mart because wall mart has grocery and Amazon did not, right? And then, you know, Amazon has really turned up the heat on grocery. And so now it's closer to apples to apples. So now Amazon is ahead of wall mart US. But wall mart ink has Sam's Club revenue in the US. So if you add the US Sam's Club revenue with US wall mart revenue, depending on who's estimate you believe, they're super close, depending on who's estimate you believe, it's neck and neck. And wall mart, we don't know their Q1 numbers yet. So we'll have to see if they're like, this is a big growth quarter for Amazon. We'll have to see if wall mart's able to keep up. But the general story that wall mart is also vastly outperforming the market is true. So the two largest players are outperforming and you know, that creates a huge bifurcation in the market, right? Yep. Interesting. Cool. Anything in the fulfillment delivery that tickled your fancy? Well, like my big takeaway is that they're getting the goods closer and closer to the consumer and they're delivering the goods faster and faster, right? So they have all these vanity metrics they like to talk about, about how much, how many goods they're delivering more quickly. So there's now like 300 cities of a memory memory that are doing one hour delivery including myself, you're in Chicago. There's like 2000 cities that are doing three hour delivery. And that's on like 90,000 items. For same day delivery, they're in the millions. And so they took a shot, like I assume there was aimed at wall mart where there was kind of funny where they said something like, that's 10 times the assortment, items we deliver same day as you can get from a big box store. And so the amount of items that they can deliver fast and the speed at which fast is keep going up and up. And what's super interesting is the mix is changing super fast. So it used to be that it was predominantly general merchandise and not a lot of grocery. Now it's a lot of grocery including fresh and frozen and perishable. So I think we'll talk about that a little bit later. But basically the Amazon retail story, the growth is largely coming from moving goods to closer to the customer delivering faster and therefore getting a big share of wallet. Got it. Yeah, there's part of the thing I thought was interesting was this India. There was one country. Okay, it was Tokyo. This Amazon now was really interesting. Yeah, it's in 12 countries. Yeah, what do they call power? Yeah, what do they call gopuff and that stuff here that's kind of like followed by a little bit? Instant commerce is that we use it. Yeah, yeah, yeah, yeah, because this commerce sometimes. Yeah, is this instant slash click commerce like more popular in these areas and that's why they're doing it or like yes, exactly. Well, so two things, different labor costs, which is complicated, right? So both, you know, the labor rate for delivers in India and China is much lower than it is here. The average income is of course also much lower. So it's not, it's not like you have the same wealthy consumers ordering this stuff for for instant delivery and it's just cheaper deliver there. Like the economic model is very different, but it is more affordable to deliver stuff super fast there. And so both both Amazon and Flipkart are competing significantly on in this 30 minute category and consumers are adopting it and they're, it's a big deal. Very cool. Anything jumped out at you on the revenue breakdown? You want me to tackle that or you want to jump in? Yeah, you know, so the historically, you know, they've had this big online number and they've had a smaller physical number. The physical number used to have a lot of little retail concepts in it like Amazon ghost stores, Amazon fresh stores, the grocery stores, they had the four star stores, that fashion stores, they had a beauty salon, they're all this stuff. They've closed the vast majority of those retail concepts. So today, physical retail at Amazon is is almost exclusively Whole Foods. And so if you look at the Whole Foods number, it was up like 4.6 percent, which is actually pretty decent for Whole Foods. Whole Foods hasn't had like ginormous growth and that that's a little faster than the industry average on growth even for Whole Foods, which is kind of interesting and indicative of a potential kind of turnaround acceleration of Whole Foods, which has been kind of static for a while. So that on the online versus physical that that to me is interesting. I want to say the third party mix went down a little bit this quarter. It's still about 60 percent of what Amazon sells in the US is third party stuff. And so I think the fluctuation is a little variable. I would say, and there's not a lot of coverage from this from Amazon. There's a lot of controversy in the third party community because Amazon's been jacking up the fees. They famously added a fuel surcharge this quarter. And there's a strong sentiment that Amazon doesn't treat its third party sellers very well. And the, you know, there was a time when Amazon spent a lot of narrative in these earnings calls talking about third party sellers. And it would be easy for them to feel like they were taken for granted in both Andy's shareholder letter this year and in the earnings call. So that's interesting. You know, subscription continues to grow. Both they're adding new memberships. They're adding new services for prime and they're jacking up the rates on prime. My primer news this month, I just got my my note about a higher higher price. And the because of the shift to grocery, the unit sold is growing even faster than the goods. Yeah. Very cool. The what do you why do you think Whole Foods? I'm sorry, did a little bit. So they had been into some operational efficiencies at Whole Foods. And the, you know, Whole Foods was kind of like independently run stores where managers had a lot of autonomy and Amazon kind of famously rolled back some of that autonomy and people felt like that hurt the the store experience. Well, you know, now they have that like Doug Harrington there who's a real grocer and they're really leaning into still keeping things federated as opposed to letting these be autonomous businesses. But doing a better job. They're inventing more foods. They're they're improving the the 365 private product and in Whole Foods. And they are now announcing for the first time, although their brick and mortar effort was on these new concepts now that Whole Foods is really their only concept. They're opening new Whole Foods in new markets for the first time ever. And that I would argue is actually the biggest a kill a kill his heel of Whole Foods is just their reach. They're just not that close to that many consumers. And so, you know, the fastest way for a retailer that doesn't truly have a national footprint to grow is to open stores in new markets. And so I actually think you're going to see the rate of growth of Whole Foods go up as these new new stores come on online. Very cool. Yeah, they've done a lot of, you know, nothing super new there, but integrating Amazon experience in there. So whenever I go do returns at Whole Foods, the line is like the longest part of the grocery store. Yeah. So maybe that's bringing some people in. Yeah. They keep tweaking it. I will say I personally am very sad. They're they're turning off one feature in those stores that I thought was really good, which is called Amazon one, which was the palm reader. Yeah, the pulpit. I could never get it to work. Yeah, that is why they had a lot of operational trouble with it. But like when it worked, which had always worked for me, it was super convenient. It was fast. And it's still an annoying experience in Whole Foods. You got to give them some kind of payment method. And you have to separately give them your Amazon prime number. And with the palm, you just waved your hand over the thing and it all magically happened. Yeah, not much as you mentioned on the marketplace side, not much really exciting there. Just like kind of flat down very ever so slightly. Yeah. I didn't really even see Wall Street spend time on it because there's so much other stuff that the marketplace is kind of falling by the by the way side. It's just like not the exciting new thing anymore. So I would argue that that is more Broadway true of the entire retail category at Amazon. Yeah. It's kind of a side show to the whole other stuff. Yeah. Yeah. And maybe we'll come back to that at the end. But I would say the big standout thing, and they didn't spend a lot of time on it for the art or last point. But the biggest news, the biggest thing to me in the whole Amazon retail ecosystem is their emergence of as a credible grocer. And they threw out a good new stat in the earnings call, which is that cumulatively in the US, they sold 150 billion hours of groceries in 2025, which makes them the second largest grocer in the US behind Amazon. So that puts them ahead of trogor. And that that was absolutely far from through a year ago. So the this big initiative they did to put climate controlled zones in all the fulfillment centers and the sortation centers and start delivering grocery with their general merchandise and having a unified experience and the faster delivery. All that is totally working. And they're they've become the number two grocer in the US. And that that's huge. Yeah. Yeah. And it did get kind of swept over. Yeah. So I actually didn't see that. So thanks for a reason though. Yeah. But what was the at the front, if grocery was kind of the backstorting on the back burner, then AWS was very much on the front burner with the gas turned to high. It was the star of the show. There's if you remember what we did our last show on Amazon where we talked about the Q4 earnings. There was this concern, right? There was a bear case that kind of was winning in the Wall Street sentiment wars where they're like, yeah, you say your capacity constrained. You're spending all this. Your margin is going to compress this. You know, you don't have open AI. You don't really have your model. What's going on here? So they really eliminated all those concerns in one quarter, which is pretty amazing. So number one, AWS revenue accelerated. And it's on this kind of linear acceleration path where if we go back a couple quarters, it was kind of at 17% your rear growth. Then it went to 20% and then to 24, which was pretty good in fourth quarter. And then here in Q1, it grew to 28% your year. This is a thing that's already at like 40 billion. And it's like accelerating. So that's the AI tailwind really starting to show up. But then everyone's always like, yeah, but your margins margin margin margin. So this was the biggest surprise of the quarter on the beat was the AWS operating margin came in at 37.8. Everyone thought it was going to go down. And it bumped up, which was pretty wild. One of the things driving that is they invested in their own chipset called training. Now, this is a misnomer because you actually don't train AI with this thing. It's an inference chip. But historically, for some reason, they called it training because you could use it for training, but it actually ends up being better for inference. Back when AI was new, everything was training. So that's like no one, no one really cared about inference. But now that it's getting older, running the AI models and scaling them has become more important than training. And Amazon ended up in a good place at a good time. Google has a similar chip called TPU. And it is on a similar trajectory. But I would say one of the areas that's become interesting a little bit for Google, but mostly Amazon, they now have people wanting to buy just the chips. And so they actually want either Amazon to host a rack of these chips, which is a little bit outside of how AWS normally works is they're not usually like a hardware provider right there, a compute provider. And then they even said there's this huge demand for people to just they're just like want to buy on the nose Them themselves and their own data centers. This would be like the open AI's an anthropics We've kind of ended it this but I'll go ahead and explicitly say it one of the big announcements within the AWS bucket is Amazon did get out of their exclusivity and excuse me open AI get out of the exclusivity with Microsoft and now AWS has within AWS and the piece inside of their called bedrock You do have access to the open AI models now and that's a huge win for Amazon a Lot of people speculate this is anticipation of open AI going public and so that was a really big win within here as well Where everyone is pretty excited that okay all those little bear things that kind of added up to be you know some negativity Everyone of them will go washed away in like a one-hour phone call. It's not crazy And then what really kind of like blue people's mind was they all disclose this backlog this backlog Was previously you know, I think it was like 200 billion so it's pretty big But they basically said it was kind of funny. It was an a Q&A They just kind of dropped it in there because it usually comes out in one of the the filings later So so one of the Wall Street guys said hey, what's the backlog in jacy said? Yeah, it's 364 billion remember it used to be 200 billion so like double the one quarter and then he said So everyone always assumes there's a lot of things that are kind of baked in there like they did this big anthropic deal And they they previously on the call talk about all this training Then he said oh and by the way that doesn't include the hundred billion from anthropic and it doesn't include the 200 something billion for training and everyone's like wait a minute if we add those in 364 plus 100 plus that that's like it was like 700 It got really weird like quiet on the conference call because I was like what is going on right here like like It was I don't even think while she's suggested all that yet because it's like such a big number You're just kind of like they almost have a you know, there's just a world where they could have a trillion dollars and backlog, which is just crazy and this is for a business that's a you know Doofy doing like 40 billion a quarter so it's at 160 run rate and they may have a billion dollars of backlog. That's just like mind-blowing Yeah, so so there was just kind of like you know Jaws you could hear Jaws hitting the floor on that one so and that's Even since even after the the day the 29th here day later the stock is kind of out a bit of a run Which will be interesting to see Another thing that we think usually should be on the front burner was on the back burner for this was was advertising What would you see there? Yeah, yeah, so They didn't spend very much time talking about it, so but it was another Very solid quarter on the on the ad business, right? So for the quarter they sold it 17.2 billion dollars in ads, which is up like 22% So these are very material big businesses and I think people were we're kind of glossing over You're not supposed to talk about this kind of growth this big a business. I mean am it AWS being the marquee example You're not supposed to be talking about these like 25% growth on these huge businesses So so ads continues to grow super fast The run rate now if you'll get the last 12 months they there's the trailing 12 months there at like 72 billion dollar ad business so it's it's Very cat rapidly catching up to the digital ad businesses at Google and and meta It definitely is the third largest ad business out there and one huge difference you have to remember between AWS and ad business is the the capital Expense requirements for those two businesses, right like AWS is awesome The problem is you've got to spend a huge amount of money up front on land and power and ships and then you get this this long-term Payback on on all of those investment years down the road The ad business is almost free on top of the retail business, right? And so the profit from this this ad business is is on a per dollar basis is much better people estimate It's it like 50% gross margin business. I actually think that potentially is conservative and so usually what we talk about is even though the revenue from AWS is bigger than the revenue from ads that the amount of earned income from ads is actually bigger than the amount of earned income from AWS and I'm here to tell you that that's no longer true Like AWS is growing so fast That that it now is materially out contributing to the to the ad business you you desperately you definitely would want either of these businesses, but I want to say AWS contributes like What do we say like 50 14.1 billion in earned income The ad business if it's a 50% gross margin is probably contributing about 8 billion so it's so AWS is almost twice is as many dollars to the free cash flow is as the The ads business right now. So that is all super interesting I guess you know, there's some interesting things Amazon mostly used to sell ads to as sponsored product listings and in the marketplace, which is still true, but increasingly They're doing these interesting data partnerships. So they have a huge partnership with Netflix so you can buy a Netflix audience add on On Amazon and have a huge partnership with Comcast so you can use your Amazon purchase data to buy ads digital ads that show up on the Comcast network So it's they're definitely shifting from ads being kind of You know a core part of their retail business to ads being a standalone business You know what's interesting about all this ad stuff and you mentioned that for the first time meta as I had a Google Like all these ad businesses are accelerating and then you know part of open and I is in IPO thesis I think that stuff I've seen is they they're gonna go from nothing to a hundred billion dollar ad business Which if anyone can do it is them, but then I think man there up against some really crazy competition. They didn't exist You know 18 months ago So it's gonna be an interesting to see can they carve that off? Where does it come from? Is it incremental off from offline and maybe that's a topic for another show? It's just like fascinating to me how this is gonna play out What I think is gonna be super interesting is the very different circumstances the I'll call them the incumbents versus the high breads versus the non-incumments right? So Amazon Google and meta mainly make money from ads, right? So they have a legacy ad business to protect and as all these new customer experiences coming in the world All of these agentic experiences. There's a huge risk that it will be harder to monetize those experiences with ads so those those guys have a you know innovators don't know about you know how fast they want to move to this new world Amazon is kind of a hybrid, but they got called out like that was a question in the in the earnings call too Andy is hey, what's gonna happen your ad business when when all of this agentic stuff comes true and you know he Andy had to say oh my gosh, I think it's gonna be good for the ad business because a It makes it cheaper to make an ad right like essentially they all the first argument is everyone will have to pay less money to pubicists Because the robots will make all the ads right yep the cost of the ads is not that material in the whole ad business right? So I wish it was more But so so that's an interesting point, but I don't think it changes the economics for for Amazon anymore And then what Andy was saying is what is interesting is you know people don't just do one one agentic prompt and then buy something that there's this Bimodal back and forth and that there's a refining and that there's multiple iterations of prompts And that one of the new things we have in our experience is suggested prompts you give us a prompt and we suggest what your follow-up should be and he's actually Suggesting and implying that sponsored suggested prompts maybe the the primary way to monetize ads in the in the agentic world so I don't know I think it's too early to To see how consumers use all this stuff, but that that's an interesting thing to watch right Amazon has some ad Revenue to protect and so they have to be a little careful Anthropic and open AI have no ad revenue or no meaningful ad revenue right and so they get to do Whatever makes the most sense to make money in the new world and so I just think that's an interesting Sort of different starting point that all these companies have Yeah The other thing that was exciting to me and this is gonna be a shocker are you sitting down Jason? I am I am The agentic commerce was the real star of the show so AWS was pretty good and then it was outstaged by agentic commerce So what is this agentic commerce you're talking about? Well the flavor of Amazon is ruthless so it's our little orange corgi friend their roofus And they released a bunch of new data points. This was exciting, but they always change them So there's never a linear line that you can draw which kind of on purpose So they previously had talked about some maus this time they introduced they said the number of users is up 115 percent Last quarter they said there's 300 million using it, but you can't tie a line here because that 115 percent is your year So yeah, and it's also a monthly active users versus yeah, they've confiscated everything which is confusing So but you know they want you to know there's a lot more than them Yep, the one that's maybe more interesting and again, it's kind of like they didn't define it, but they said roofus engagement is up 400%. Now, there's a third party called Sensor Tower, and they put out some really good data, and I'm working on a blog post kind of summarizing some stuff there that, you know, and there's a bit of you will cleverly and correctly point out the causality here, but, you know, they're basically pointing out that the people rattling through Rufus have a super high conversion rate. Now, there's, there's like, that's the causality. Like, is it, that they already intended to buy something when they went in there? And then, you know, we, unless you did a two audiences, you know, and, and you did kind of a double blind kind of thing, you wouldn't really know the causality, but there's a lot of implication. The causality is very strong that these, these systems are improving the matching of the shopper intent to the catalog, and resulting in better outcomes, which I believe that I do, I do, I do believe that's happening, it's kind of a question of how much and are they just picking off, cherry picking the best audience or not? Yeah, we call it the, well, well, you're right. We call it the correlation versus causation question, right? Yeah. I do. Does Rufus cause people to have way higher buying intent, or did the people that arrived at Amazon with way higher buying intent, are, were they more likely to use Rufus, right? And the answers, of course, somewhere where in between, I think Warren Buffett, you always tell this, what do you call it, the duck story about how like the ducks could believe they made it rain, if you, if you can use correlation and causation. So, so yeah, I, you got to take all of these successes with a grain of salt at the moment, but I think it's directionally true that more people are trying this stuff, and they're having good outcomes, and they're coming back and using it more often. Yeah, and there's, there's, you know, so the sensor folks have a sensor tower folks have a lious specifics, but, but they basically said Rufus users are 60% more likely to complete a purchase. So, there you go. So, take it a little bit of a grain of salt on that. They did announce a ton of stuff. So, there's eight new features they rolled out just right before earnings, which I thought was interesting timing. You mentioned that they now have sponsored products inside of Rufus. They have sponsored prompts now. They have brand prompts. And then they have this thing, I haven't had chance to try it yet, but it's on my weekend things to do. And it's called Here are the highlights where if you have a certain type of product, it will, and this has to be, let's see, it's on the mobile app, and there's only uncertain skews, so it takes a bit to find it. But they, you can actually have it create, if you've ever used notebook all of them, it creates a little podcast about the product. So, they announced here that they now have, quote unquote, millions of customers using it, and they've streamed over 40 million minutes of content around that, which was interesting. And you can actually, you know, a multimodal verbally chat with the product catalog, which is kind of interesting. So, you could say, you know, hey, these headphones, what is their hyoryt? You can ask it all kinds of questions. There's also a bunch of people on YouTube that are trying to get it to, they'll go pick an embarrassing personal product and try to ask it a bunch of embarrassing questions, and it does surprisingly good, not falling into a bunch of traps there. So, if you want, like some sophomore, a humor that you and I would never associate ourselves with, there's a lot of funny videos about there about that. What was interesting to me, and this is kind of frustrating, is, Jassy continues to throw, so this was new. He's now calling Chatch B.T. and their little horizontal agents, which I thought was interesting. And that's what I've been calling them for a while. So, obviously, it's from listening to the podcast. And he keeps kind of saying, they don't know anything about products. They always get the price wrong and all these things. And they can't tell you when you're going to get it. That's just like essentially not true. So, they're actually pretty good at all those things. So, I do worry that he lives in his little Amazon bubble, and, you know, knowing there at Amazon is written a six-page memo to kind of tell him he's wrong on that. So, all of our Amazon listeners, one of you be brave and write a six-page for Jassy to fix that. Thank you. They did also, we tease this at the top. Here's the big payoff. They are in UCP. So, that's really interesting. So, the way I would think about this is what Amazon has decided to do, and we talk about this is, they are blocking all the other folks from calling them, but they are allowing data in. So, they have this thing called Shop Direct or Direct Shop. I can never get those words in the right order. And then they have a buy for me in there. The buy for me is the last remaining vestige of a browser-based, a gentick-a-purchase mechanism out there. And for Plexigy had one, they've they've replaced that with more server-to-server, and then Gemini has done the same thing with UCP. I take the signal of them, this is me speculating, this is not announced. They didn't announce they're in the UCP partnership, but not what they're going to do with it. I think you will be able to buy, they'll be a new thing. So, we've had one P and three P. There's going to be a new, you know, Direct Shop or Shop Direct. I can't remember thing where you can, you can, using UCP, you can check out right on Amazon from brands that don't really want us on Amazon. They're going to pull them in. And what they're doing is they're doing an asymmetrical information war where they're going to go subsume. I call it embrace extend and extinguish. This was a famous Microsoft strategy. They're embracing a gentick commerce horizontally so they can get all the UCP inventory. So now you'll have all the Amazon and the UCP, whereas Google, who I think they view as their main competitor, will only have the UCP inventory. So, it's actually a brilliant strategy because if you believe selections, what's matter, it closes off their flank from an attack on selection by having that virtual selection that's all on UCP, but it also doesn't allow a frontal attack because they're protecting their selection. So, it's really interesting from a strategic standpoint to see this this play out. Yeah, absolutely. I would say on the UCP thing, again, two or eight to know, but I would, I would tend to agree with you. I think they're going to be consuming a lot more UCP feeds than they're going to be publishing UCP feeds. Yes. And so, you know, it's still, they're smart to be in there. They're smart to be shaping it, right? Like they don't know what the future is going to be. Maybe they will have to sell through UCP one day. And it's in their vested interest to make it a good functional protocol. Like for sure, it's the last straw in like a de facto winner in the in the protocol wars, right? Because, you know, OpenAI launched ACP and, you know, all the ACP partners have now moved over to UCP. It was a more robust technical protocol just anyway. And now it's got all the industry support. So I kind of look at the protocol wars as a repeat of the beta versus VHS wars. And the only difference is in the beta versus VHS, the VHS had all the good partnerships, but beta had the technical superiority. And it turns out the industry partnerships won over the tech superiority in these protocol wars. The both both the UCP is the better protocol and it has the better support. So it seems like we're all better off that it won. I do want to go back though on the Andy Jassy stance on horizontal agents. Because I think people need to pay close attention here. You know, essentially what he's saying is he keeps it. He right now he does Amazon does not participate with the horizontal agents at all. And he keeps saying, Oh, it's coming. We're negotiating with them. We're trying to work out things. We see a future where we do work with those. But we think we're going to win. We think we know way more about the products and the purchase in 10 and the purchase outcomes than the horizontal agents and customers are just going to prefer our experience. Right. And so they so his position is we have a right to win. You're going to pick Amazon first go to Amazon and then have an experience on Amazon because we know more about the products. And while I agree with you, I think he's under he's overestimating how bad the the product data is in the rest of the world. Like there, of course, there are problems with product data in an outside of Amazon. He's overestimating how bad it is in the rest of the world. And I don't think that's going to be the moat that's going to cause him to win. He is right that at the moment, Amazon knows more about the that that purchase intent than likely open AI does. But what he's completely glossing over is open AI knows a lot more about the rest of our life than Amazon does. Right. And you know, open AI knows what medical conditions we have and that we've asked about. They know what vacations were planning. They know what what diet we're trying to get on. And so, well, Amazon might start with a competitive advantage in shopping intent data. Open AI has way more context and context and relevance for the rest of our life that impacts what products we might buy and use. And so I actually, if I had to bet right now, and I think I said this in a LinkedIn post, I think it's going to be easier for open AI and Google to fix their purchase intent gap. Then it is going to be for Amazon to fix its its life context gap. And so, you know, I think this horizontal versus vertical bots is going to be an interesting battle. But if I had to bet right now, I would I would bet on the horizontal agents to win this in the in the long run. Yeah, I agree. Like even to your point at the top where you went to a poobless this healthcare thing and like, Chatch, she knows all your health stuff, right? Like who's going to be better at recommending a medicine for you or, you know, when I ask for a sunscreen, it knows my kid has eggs in my right? Like I didn't, you know, yeah, Amazon doesn't know that much. No, specifically, you know, it picked it out of some prior search thing, which it could, but they're going to start to get they need to elevate and become a personal agent for everything, which I think I think ultimately I won't say her name, but ALA, EXA. You know, I think they'll have to do something there. - Yeah. - And it's just like really not keeping up with that by any means. - No, although one tiny tidbit on that particular one, they didn't have a new data point, which is that the plus version, which we all have agreed is much better, they're saying it has three X the conversion rate that the traditional one did. So it is not shocking 'cause the original one was pretty bad, but the plus version is apparently selling more goods. - Good. And then we're up against time. So I'm gonna just go through this last part fast. You've probably guessed from the recap at the top, but when you sum it all the spending on AI, it's just massive. It's like now 700 billion. So it's getting to be ridiculous numbers, but the backlog is there, right? So just, I only spent detail on Amazon's backlog, but everyone has a crazy backlog right now. So there's definitely this wall of spending behind this investment. So I think it dispelled this AI bubble notion, at least in my mind. At Ford guidance, Amazon, they're always conservative. This was a beaten bracket. So even though they crushed it on earnings and everything, they came out a little more conservative. They kind of threw, they always do, when they have a great quarter, they throw, they try to throw a blanket on it so that expectations don't run away. So they talked about memory costs. They've got their lower, the orbit thing. They've got fuel transportation costs. They've got a lot going on. So we'll see. So we'll be back in a quarter and 90 days in kind of, let you know how that went. Anything else from the quarter you wanted to come up? - Yeah, the only thing looking at all of this in its totality, I think the most interesting thing, which people are not talking about a lot, is how little Amazon is talking about and thinking about retail and all of this. So I know we, we have, we've been breathed the agent to commerce piece, and it's still a huge, highly profitable business that drives a lot of other things for Amazon. But the two stark things for me, Andy Jesse does an annual shareholder's letter that he took over from Jeff Bezos. And this was this way, document that I used to look forward to that was super insightful and interesting every year. This year's earning annual letter that came out last month did not mention retail once. It was exclusively about these new businesses at Amazon. And then in their earnings call, it's a 60 minute call, 40 minutes of our content and then 20 our Q&A. Do you know how many minutes they spent on retail in that 40 minute upfront section? Three and a half minutes. - Oh, did you have a little retail geek here? - No, I'm okay with it, but because here's what I think is funny. Like on this podcast, for years, people are always, who's gonna disrupt Amazon? What's gonna disrupt Amazon? And five years ago, my answer was potentially, their other businesses get so big that retail just becomes a material and they stop paying attention to it. And I feel like that in some ways is happening. It's still a huge business. If they stop paying attention to it in its entirety, it would take a long time to depreciate and wind down. And I'm not saying they're losing all momentum. I mean, their growth rate is accelerating at the moment. But what I am saying is as percentage of the attention for the CEO, we may have passed the moment of peak retail at Amazon. And so I suspect that Amazon is gonna get less cycles from Andy, retail is gonna get less cycles from Andy Jassy every quarter for the rest of time and less cycles from their board and less cycles from their S team than ever before. Just by virtue of how big and exciting these other established businesses are and how big and potentially big these two or three new businesses are. - Yeah, I can't remember if it was this quarter or on some things. He's kind of started and his background is from AWS side of things, right? So this is kind of natural progression. But he's kind of his framing is, like he kind of says the retail, the store, he calls it the store. He's like, the store is one of our bigger customers on AWS is calling how he thinks about it. So it's kind of gone from the engine pulling the entity forward to like one of the many customers of AWS and he calls it the store. So it's kind of funny. The first time he said that, I was like, what store is he talking about? And he's like, oh, the store capital T. Yeah, the store, yeah, that's pretty big on-cons store you got there. Andy. So yeah, I thought that was an interesting framing that it's basically had. You got another customer of AWS over there, just doing this thing. - Yeah. And so is there any other lighting around things you want to hit on before we call it a day? - No, I think we've used up more than our a lot of times, Scott. So as we always say, if you found value in this, we sure would appreciate it if you jump on iTunes. They still accept reviews. Believe it or not, 12 years later, you can still write a favorable review of the Jason and Scott show. And if we get enough reviews, maybe we'll do more frequent episodes. - Yeah, they're actually hard to find. So think of it as a mental puzzle to see if you can figure out how to leave a review on Apple podcast. They've hidden it. So good luck. - Yeah. - And until next time, happy conversing.