Though it has made significant strides in automated driving, owners should not rely on Tesla’s driver assistance features to necessarily add safety or to make driving easier, based on Consumer Reports’ extensive testing and experience.
Most features within Tesla’s Full Self-Driving Capability suite worked inconsistently, including the Autopark self-parking system that has been around for several years.
On Thursday, Amazon released their Q2 FY 2020 results and it was nothing short of impressive. Below are my notes:
Even during the pandemic, Amazon net sales were $89 billion in Q2, up 40% YoY. In fact, if you look at their net sales in Q2 in the last 5 years, it’s an astounding 31% CAGR.
North America still led the way among their three main segments with more than $55 billion in net sales. AWS is now an annualized $43 billion business and responsible for 13% of Amazon’s total net sales. In the last 5 years, CAGR for North America, International and AWS is 33%, 23% and 39%! If you look at a deeper level, online stores were still responsible for the bulk of Amazon’s net sales while 3rd party and AWS were the next two largest segments. Advertising accounted for 5% of Amazon’s net sales. Their shares have stayed largely the same for the past 3 years,
AWS continued to account for more than half of Amazon’s operating income. Historically, Amazon lost money on their International front, but in this quarter, the segment recorded $345 million in Operating Income. Total operating income was up to more than $5.8 billion, almost up by 90% YoY. Once again, this was during a pandemic.
Shipping costs grew to more than $13.6 billion in Q2 FY 2020, from $4.56 billion in Q2 FY 2017. In the last four years, shipping costs rose at a faster pace (44% CAGR) than the combined net sales of online stores and 3rd party (28%). As share of cost of sales, shipping costs accounted for 26% of total cost of sales (AWS’ cost of sales weren’t recorded here), up from 19.5% in Q2 FY 2017. According to Amazon’s 10Q, here is how they define Cost of Sales
Cost of sales primarily consists of the purchase price of consumer products, inbound and outbound shipping costs, including costs related to sortation and delivery centers and where we are the transportation service provider, and digital media content costs where we record revenue gross, including video and music.
There are two ways to look at Amazon’s shipping costs in my opinion. First of all, the increase in Q2 FY 2020 is likely due to Covid-19. The rising trend can also come from Amazon’s effort and investment in last-mile delivery which is the most expensive delivery type. Amazon is now the fourth largest delivery service as of May 2020. If other retailers want to compete in terms of delivery, this level of commitment and investment will likely await them. In fact, Figure shows the level of capital expenditure by Amazon over the years. Just. Look. At. The. Growth!
In business, cash is king and Amazon is a phenomenal cash-generating machine. As of Q2 FY 2020, their operating cash flow trailing twelve months (TTM) stood at $51+ billion, up 42% YoY. Free Cash Flow TTM was almost $32 billion.
Additionally, AWS’ momentum is reflected in the remaining performance obligation in the last three years. Performance obligations from contracts whose original terms exceed one year stood at $41 billion as of June 2020, up from $16 billion two years ago. It’s indicative of the revenue in pipeline for AWS.
Lastly, I think this is the first time Amazon broke out their expenses for digital content, including video and music.
The total capitalized costs of video, which is primarily released content, and music as of December 31, 2019 and June 30, 2020 were $5.8 billion and $6.1 billion. Total video and music expense was $1.8 billion and $2.8 billion in Q2 2019 and Q2 2020, and $3.5 billion and $5.2 billion for the six months ended June 30, 2019 and 2020.
In summary, I am in awe of Amazon as a well-oiled company. Even at its size, the company seems to have a lot of good things going in their direction and real competitive advantages. The retail and cloud markets are big enough for Amazon to grow more in the future.
Disclaimer: I own Amazon stocks in my personal portfolio.
Structured procrastination means shaping the structure of the tasks one has to do in a way that exploits this fact. The list of tasks one has in mind will be ordered by importance. Tasks that seem most urgent and important are on top. But there are also worthwhile tasks to perform lower down on the list. Doing these tasks becomes a way of not doing the things higher up on the list. With this sort of appropriate task structure, the procrastinator becomes a useful citizen. Indeed, the procrastinator can even acquire, as I have, a reputation for getting a lot done.
Next time if you want to support local restaurants by ordering on delivery services like Grubhub or DoorDash, you may want to do a bit of research on how those services treat restaurant partners. Here is an example
Tech giants reported their earnings this week and proved how resilient their businesses are amid arguably the most challenging environment ever. In this post, I’d like to demonstrate with visuals how important AWS is to Amazon, and how China, Wearables and Services are to Apple while it has become less of an iPhone company.
In the last 90 days, Amazon recorded $63 billion, meaning that it took the company less than 36 hours to make $1billion. An extraordinary rate. Compared to last year’s Q2, revenue rose by 20% with Services (31%) outperforming Products (12.5%). Nonetheless, gross margin slipped as this quarter’s figure is at 4.8% compared to 5.6% last year.
Among Domestic, International and AWS categories, the latter continues to lead the way in terms of YoY growth. AWS’s revenue in the last 90 days is $8.3 billion, a rough equivalent of about $32 billion annually. It’s pretty impressive for just a segment of a company. Not many standalone companies can generate that much revenue in a quarter. It’s even more telling when we put AWS next to GCP. Google announced last week that GCP’s annual run rate is $8 billion, meaning that AWS is approximately 4 times bigger than its rival from Google.
Despite making up only 13% of Amazon’s revenue, AWS is responsible for about 69% of the company’s operating income.
At 37%, AWS’ YOY growth is the lowest recorded in a long time, but the law of big numbers should be taken in account here as the division is not as small as it used to be. If broken down into more strategic categories, AWS isn’t the segment with the biggest YoY growth (Excluding FX) in the company. It’s Subscriptions. Subscription memberships, especially Prime, play a crucial role in Amazon’s ecosystem. The fact that it notched the biggest growth, ahead of AWS, is very positive for the company.
As can be seen above, advertising slowed down significantly after a hot streak just 12-15 months ago. YoY growth decreased noticeably compared to the 3-digit growth just a while ago. Still, it contributed $3 billion to the company’s top line.
Free Cash Flow and Shipping Costs
Amazon’s free cash flow this quarter is truly insane with 65% YoY improvement in Operating Cash Flow and a 3-digit growth in Free Cash Flow.
Shipping costs continued to rise with 36% YoY difference compared to previous second quarter’s. It’s worth noting that none of the Online Stores, Physical Stores and 3rd Party Seller Services have the same growth (all grew at a slow pace than shipping costs)
Sometimes, it’s hard to believe that a company founded roughly 25 years ago can be this powerful and big. A segment responsible for only 13% of its revenue is the dream of so many and it continues to deliver at an impressive rate.