4 Things Amazon.com, Inc. Management Wants Investors to Know

Amazon gives investors insight into its aggressive investments, how robotics continues to be a tailwind for the company, and the importance of Alexa-enabled devices.

With Amazon.com (NASDAQ:AMZN) stock hitting new highs after the company’s first-quarter earnings release, it’s a good time for investors to look past Amazon’s financial results and listen to some of the big-picture commentary from management.

Here’s a look at some of the most useful excerpts from Amazon’s first-quarter earnings call (via a Reuters transcript) and comments from management in the company’s first-quarter press release.

An update on Alexa-enabled devices

When asked about how Amazon was monetizing its devices with its built-in intelligent voice assistant, Alexa, Amazon CFO Brian Olsavsky said monetization isn’t the primary focus with Alexa-enabled products.

The monetization, as you might call it, is — the theme of your questions, that’s not our primary issue right now. It’s about building great products and delighting customers. We think as engagement — as we pick up engagement with the devices, it helps the engagement with Amazon as a whole.

Aggressive investments

True to its historical aggressiveness in pursuing market share even when it means margins may suffer in the near term, Amazon’s North America segment operating margin fell from 3.5% in the year-ago quarter to 2.8% in the first quarter of 2017 as Amazon pursued some big opportunities. Here’s what Olsavsky said about this trend:

So right now we’re just seeing a lot of great opportunities before us, and we’re continuing to ramp up the investments in pursuit of those opportunities. And the big picture is, again, as we’ve said, customers — we want the things that customers love, can grow to be large, will have strong financial returns and they’re durable and can last for decades.

Olsvasky went on to list Alexa-enabled devices, video content and marketing, an expansion of Prime benefits, new fulfillment networks, artificial intelligence, machine learning, and services for its Amazon Web Services (AWS) customers as key areas the company is investing in heavily. “There’s a lot of investment in front of us that we’re optimistic about and we continue to ramp those investments,” Olsvasky concluded.

Amazon wants to dominate India

In Amazon’s first-quarter press release, CEO Jeff Bezos gave investors a useful look into the e-commerce giant’s efforts to capitalize on the fast-growing Indian market.

The team has increased Prime selection by 75% since launching the program nine months ago, increased fulfillment capacity for sellers by 26% already this year, announced 18 Indian Original TV series, and just last week introduced a Fire TV Stick optimized for Indian customers with integrated voice search in English and Hindi. … Amazon.in is the most visited and the fastest growing marketplace in India. It’s still Day 1 for e-commerce in India, and I assure you that we’ll keep investing in technology and infrastructure while working hard to invent on behalf of our customers and small and medium businesses in India.

Kiva robot in an Amazon Fulfillment Center


Robots are producing amazing results

One area where Amazon continues to make significant strides in efficiency is with its robots in fulfillment center networks. Olsavsky explained the ongoing impact of robotics on Amazon’s business:

So particularly as it pertains to our fulfillment center networks, I think the biggest areas of efficiency right now are in our Amazon robotics areas. That technology continues to improve, and we’ve — we’re now multiple generations down … [A]nd it’s just amazing to see the strides that the Amazon robotics has taken and the efficiency we’re getting in our warehouse as a result.

Olsavsky also noted that Amazon’s investments in robotics technology mean the company’s latest fulfillment centers are more capital-intensive than prior versions of its warehouses, but he also said these newer fulfillment centers “generally have much better operating efficiencies and variable costs following their start up.”

Between a lower operating margin, aggressive expansion in India, the rapid proliferation of its Alexa voice assistant, and more advanced and efficient robotics, the overarching theme at Amazon remains largely the same: The company wants to capitalize on all of its best long-term opportunities, even if it means lower profit margins today.

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Daniel Sparks has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.

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