Amazon revenue up 11% in Q2, buoyed once again by advertising

Amazon reported global revenue reached $134.4 billion in the second quarter of 2023, which marked an increase of 11% from Q2 2022.

In an earnings call on Thursday, CEO Andy Jassy pointed to “progress we're making on several key priorities,” including—no surprises here—advertising, delivery speed and generative AI.

Advertising

Amazon’s perennially hot advertising unit, which offers sponsored ads along with display and video advertising, was yet again a bright spot, hitting $10.7 billion in the quarter, which was up 22% year over year.

In addition to a partnership with social media platform Pinterest for display ads, the ecommerce giant also introduced new machine learning models in Q2 to “help advertisers reach previously unaddressable audiences.”

“Our performance-based advertising offerings continue to be the largest contributor to our growth,” Jassy added.

In a press release, Jassy pointed to “the ramp up for Thursday Night Football [and] the ability for advertisers to tailor their spots by audience and create interactive experiences” as contributing factors to the “strong demand” for Amazon’s ad services.

According to the release, these models “analyze a range of signals to help advertisers predict and reach highly relevant audiences with optimal cost-efficiency, which is critical to reaching desired audiences as the advertising industry moves away from third-party cookies.”

While Amazon did not share specifics, it noted it has seen performance improvements like an increase in click-through rate and return on ad spend (ROAS), as well as a decrease in cost per impressions (CPMs) as a result.

Delivery speed

Both Jassy and CFO Brian Olsavsky spent quite a bit of time discussing delivery speed on the call, alluding to pre-pandemic promises from almost exactly four years ago for one-day shipping as the Prime membership standard. 

Again, while the notoriously tight-lipped company did not share details, Olsavsky said Amazon reached “record levels” when it comes to delivery speed in Q2. 

That includes more than half of Prime member deliveries in the 60 biggest U.S. metro areas arriving the same or next day in Q2. Amazon also noted it has delivered more than 1.8 billion units to U.S. Prime members the same or next day so far in 2023 overall, which is nearly four times the units delivered at that speed by the end of Q2 2019.

This is thanks in part to a new fulfillment network format in which Amazon has switched from one national network to eight separate regions serving smaller areas.

“We keep a broad selection of inventory in each region, making it faster and less expensive to get those products to customers,” the company said in the release.

As a result, delivered packages have seen a 20% reduction in the number of touch points and a 90% reduction in miles traveled. 

The company is also planning to double the number of same-day fulfillment facilities, although it was not immediately clear how many facilities it has or what timeframe this encompasses. 

“We have a lot of data that shows when we make faster delivery promises on a detail page, customers purchase more often—not just a little higher, meaningfully higher,” Jassy said on the earnings call. “[It’s] also true that when customers know they can get their items really quickly, it changes their consideration of using us for future purchases.”

Retail

In terms of retail, the business also teased new formats for its Amazon Fresh grocery concept, as well as “other grocery formats.” 

Meanwhile, partnerships with retailers like Victoria’s Secret have helped expand Amazon’s offering to U.S. shoppers.

“We continue to see healthy demand across everyday essentials and categories like beauty and health and personal care, and have seen a positive customer response to improvements in personalization enhancements to our website and mobile app,” Olsavsky said.

Streaming

On the streaming front, Amazon boasted 68 Primetime Emmy Award nominations for Prime Video series like The Marvelous Mrs. Maisel and Daisy Jones & The Six.

In Q2, the platform also unveiled an ad-supported service called Fire TV Channels, which offers Fire TV users access to content from providers like NHL, Xbox and TMZ.

Generative AI 

Finally, Jassy spoke about Amazon’s future potential in generative AI, including its development of three macro layers: computing capabilities, which includes its custom AI chips; the underlying models; and the application layer.

Clients so far include advertising giant Omnicom, which is using AWS generative AI and machine learning services “to help accelerate advertising campaign development, including automating activities such as developing creative briefs, media plans, ad creative, audience segmentation and performance measurement.”