Andy Jassy
President and Chief Executive Officer at Amazon.com
Thanks, Dave.
Today we're reporting $143.3 billion in revenue, up 13% year-over-year, excluding the impact from foreign exchange rates. $15.3 billion in operating income, up 221% year-over-year, or $10.5 billion. And $48.8 billion in trailing 12-month free cash flow, adjusted for equipment, finance, leases, up $53.2 billion year-over-year. We remain focused on driving better experiences for our customers while also delivering efficiency improvements. Our financial results are an encouraging reminder of the progress we're making.
Starting with our storage business, despite having hundreds of millions of items and the broadest selection available, we remain intensely focused on adding even more selection. One way is to continue adding brands we know our customers want. For instance, in the US we recently welcomed Clinique and two Gen Z fashion favorites: Parade and Cider [Phonetic], and announced a collaboration with Hardly Ever Worn It in Europe to offer customers pre-owned items from luxury brands.
Another way to drive selection is to make it easier for our third-party sellers to add their products to our store. We've recently launched a new generative AI tool that enables sellers to simply provide a URL to their own website and we automatically create high-quality product detail pages on Amazon. Already, over 100,000 of our selling partners have used one or more of our Gen AI tools. We remain focused on making sure we're offering everyday low prices, which we know is even more important to our customers in this uncertain economic environment.
As our results show, customers are shopping but remain cautious, trading down on price when they can, and seeking out deals. In Q1, we helped customers save with shopping events worldwide, including our first big spring sale in Canada and the US. We also held spring deal days in Europe and a Ramadan event in Egypt, Saudi Arabia and the UAE. Delivery speed really matters to customers, and we've continued to get faster while improving our safety performance. In this past Q1, we delivered to Prime members at our fastest speeds ever. In March, across our top 60 largest US metro areas, nearly 60% of Prime members orders arrived the same or next day. And globally, in cities like Toronto, London, and Tokyo, about three out of four items were delivered the same or next day.
Faster delivery times have another important effect. As we get items to customers this fast, customers choose Amazon to fulfill their shopping needs more frequently and we can see the results in various areas, including how fast our everyday essentials business is growing and the continued increase in Prime member purchase frequency and total spend with us.
Over the past year, we've talked about how our regionalization efforts have helped to lower our cost to serve. We've continued to inspect our Fulfillment network for additional opportunities and are working on several areas where we believe we can lower cost even further while also improving customer experience. One example of this is our work to increase the consolidation of units into fewer boxes. As we further optimize our network, we've seen an increase in the number of units delivered per box, an important driver for reducing our costs.
When we're able to consolidate more units into a box, it results in fewer boxes and deliveries, a better customer experience, reduces our cost to serve and lowers our carbon impact. Another prominent example is our efforts to revamp our us inbound Fulfillment architecture to allow for better inventory placement closer to our customers. This will be an iterative process throughout the year as we work with sellers and retail partners and teams are making good progress on their plans.
Advertising performance remained strong, with ad sales up 24% year-over-year, excluding the impact of foreign exchange. The strength in advertising was primarily driven by sponsored products, supported by continued improvements in relevancy and measurement capabilities for advertisers. We still see significant opportunity ahead in our sponsored products as well as areas where we're just getting started like Prime Video ads. Prime Video ads offers brands values we can better link the impact of streaming TV advertising to business outcomes like product sales or subscription signups whether the brands sell on Amazon or not. It's very early for streaming TV ads, but we're encouraged by the early response.
Moving to AWS, year-over-year revenue growth accelerated to 17.2% in Q1, up from 13.2% in Q4. It's useful to remember that year-over-year percentages are only relevant relative to the total base from which you start, and given our much larger infrastructure cloud computing base, at this growth rate, we see more absolute dollar growth again quarter over quarter in AWS than we can see elsewhere.
We're seeing a few trends right now. First, companies have largely completed the lion's share of their cost optimization and turn their attention to new initiatives. Before the pandemic, companies were marching to modernize their infrastructure, moving from on-premise's infrastructure to the cloud to save money, innovate at a more rapid rate and to drive more developer productivity.
The pandemic and uncertain economy that followed, distracted from that momentum, but it's picking up again. Companies are pursuing this relatively low-hanging fruit of modernizing their infrastructure. And with the broadest functionality by a fair bit, deepest partner ecosystem and strongest security and operational performance, AWS continues to be their strong partner of choice.
Our AWS customers are also quite excited about leveraging Gen AI to change their customer experiences and businesses. We see considerable momentum on the AI front, where we've accumulated a multibillion dollar revenue run rate already. You've heard me talk about our approach before and we continue to add capabilities in all three layers of the Gen AI stack.
At the bottom layer, which is for developers and companies building models themselves, we see excitement about our offerings. We have the broadest selection of Nvidia Compute instances around but demand for our custom silicon, training and inferential, is quite high given its favorable price performance benefits relative to available alternatives. Larger quantities of our latest generation training M2 is coming in the second half of 2024 and early 2025.
Companies are also starting to talk about the eye opening results they're getting using SageMaker, our managed end-to-end service has been a game changer for developers preparing their data for AI, managing experiments, training models faster, lowering inference latency, and improving developer productivity. Perplexity AI trains models 40% faster in SageMaker. Workday reduces inference latency by 80% with SageMaker, and NatWest reduces its time to value for AI from 12 months to 18 months to under seven months using SageMaker.
This change is how challenging it is to build your own models and we see an increasing number of model builders standardizing on SageMaker. The middle layer of this stack is for developers and companies who prefer not to build models from scratch, but rather seek to leverage an existing large language model or LLM, customize it with their own data, and have the easiest and best features available to deploy secure, high-quality, low-latency, cost effective production Gen AI apps.
This is why we built Amazon Bedrock, which not only has the broadest selection of LLMS available to customers, but also unusually compelling model evaluation, retrieval augmented generation or RAG, to expand model's knowledge base, guardrails to safeguard what questions applications will answer, agents to complete multistep tasks, and fine tuning to keep teaching and refining models.
Bedrock already has tens of thousands of customers including Adidas, the New York Stock Exchange, Pfizer, Ryanair and Toyota. In the last few months, Bedrock's added Anthropics Claude 3 models, the best performing models on the planet right now. Meta's Llama 3 models, Mistral's various models, Cohere's newest models, and new first-party Amazon Titan models.
A week ago, Bedrock launched a series of other features, but perhaps most importantly, custom model import. Custom model import is a sneaky big launch as it satisfies the customer request we've heard frequently and that nobody has yet met. As increasingly more customers are using SageMaker to build their models, they're wanting to take advantage of all the Bedrock features I mentioned earlier that make it so much easier to build high-quality production grade Gen AI apps.
Bedrock custom model import makes it simple to import models from SageMaker or elsewhere into Bedrock before deploying their application. Customers are excited about this, and as more companies find they're employing a mix of custom-built models along with leveraging existing LLMs, the prospect of these two lynchpin services in SageMaker and Bedrock working well together is quite appealing.
The top of the stack are the Gen AI applications being built, and today we announced the general availability of Amazon Q, the most capable generative AI powered assistant for software development and leveraging company's internal data. On the software development side, Q doesn't just generate code, it also tests code, debugs coding conflicts and transforms code from one form to another.
Today, developers can save months using Q to move from older versions of Java to newer, more secure and capable ones. In the near future, Q will help developers transform their.NET code as well, helping them move from Windows to Linux. Q also has a unique capability called agents, which can autonomously perform a range of tasks, everything from implementing features, documenting and refactoring code to performing software upgrades. Developers can simply ask Amazon Q to implement an application feature such as asking it to create an add to favorites feature in a social's sharing app, and the agent will analyze their existing application code and generate a step-by-step implementation plan, including code changes across multiple files and suggested new functions.
Developers can collaborate with the agent to review and iterate on the plan, and then the agent implements it, connecting multiple steps together and applying updates across multiple files, code blocks and test suites. It's quite handy. On the internal data side, most companies have large troughs of internally relevant data that resides in Wikis, internet pages, Salesforce storage repositories like Amazon S3, and a bevy of other data stores and SaaS apps that are hard to access. It makes answering straightforward questions about company policies, products, business results, code, people and many other topics hard and frustrating. Q makes this much simpler. You can point Q at all of your enterprise data repositories and it'll search all this data, summarize logically, analyze trends and engage in dialogue with customers about this data.
We also introduced today a powerful new capability called Q Apps, which lets employees describe a natural language, what apps they want to build on top of this internal data and Q Apps will quickly generate that app. This is going to make it so much easier for internal teams to build useful apps from their own data.
Q is not only the most functionally capable AI-powered Assistant for software development and data, but also setting the standard for performance. Q has the highest known score in acceptance rate for code suggestions, outperforms all other publicly benchmarkable competitors on catching security vulnerabilities, and leads all software development assistants on connecting multiple steps together and applying automatic actions.
Customers are gravitating to Q and we already see companies like Brightcove, British Telecom, Datadog, GitLab, GoDaddy, National Australia Bank, NCS, Netsmart, Slalom Smartsheet, Sun Life, Tata Consultancy Services, Toyota and WiZ using Q, and we've only been in beta till today.
I'd also caution folks not to overlook the security and operational performance elements of these Gen AI services. It's less sexy, but critically important. Most companies care deeply about the privacy of the data in their AI applications and the reliability of their training and production apps. If you've been paying attention to what's been happening the last year or so, you can see there are big differences between providers on these dimensions. AWS is a meaningful edge, which is adding to the number of companies moving their AI-focused AWS.
We expect the combination of AWS's reaccelerating growth and high demand for Gen AI to meaningfully increase year-over-year capital expenditures in 2024, which given the way the AWS business model works, is a positive sign of the future growth. The more demand AWS has, the more we have to procure new data centers, power and hardware. And as a reminder, we spend most of the capital upfront, but as you've seen over the last several years, we make that up in operating margin and free cash flow down the road as demand steadies out. And we don't spend the capital without very clear signals that we can monetize it this way.
We remain very bullish in AWS. We're at $100 billion-plus annualized revenue run rate, yet 85% or more of the global IT spend remains on premises. And this is before you even calculate Gen AI, most of which will be created over the next 10 years to 20 years from scratch and on the cloud. There is a very large opportunity in front of us.
We also continue to make strong progress on our newer investments. Our emerging international stores are growing and moving towards profitability. Our third-party logistics business, offering services like Buy with Prime, Amazon Shipping, and multichannel Fulfillment continues to grow well. We just launched a Prime delivery grocery benefit that lets customers receive free, unlimited grocery delivery for just $9.99 a month, which is great value, and customers are responding accordingly.
Later this year, in Manhattan, we're launching a new, smaller Whole Foods Market concept called the Whole Foods Market Daily Shop. Prime Video continues to produce compelling content, with Fallout being our latest big hit on the heels of the very successful Road House movie, with strong customer engagement in our original and partner content.
Our health services business is growing robustly as customers are loving our pharmacy customer experience and we've launched same-day delivery of prescription medications to customers in eight cities, including Los Angeles and New York City, with plans to expand to more than a dozen cities by the end of the year, with customers now getting first-fill medications 75% faster year-over-year, nationwide. And Kuiper's getting closer to having its production satellites in space and entering our commercial beta.
There's a lot of invention happening across our business, and I'm super grateful to all our employees for their hard work and ingenuity. I'll close by sharing that I'm enthusiastic about how we started this year. We have a lot of opportunity in front of us in every one of our businesses to make our customers' lives, better and easier.
With that, I'll turn it over to Brian for a financial update.
