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Thank you for standing by. Good day, everyone, and welcome to the Amazon.com First Quarter 2026 Financial Results Teleconference. [Operator Instructions] Today's call is being recorded. And for opening remarks, I will be turning the call over to the Vice President of Investor Relations, Mr. Dave Fildes. Thank you, sir. Please go ahead.

Hello, and welcome to our Q1 2026 financial results conference call. Joining us today to answer your questions is Andy Jassy, our CEO; and Brian Olsavsky, our CFO.

As you listen to today's conference call, we encourage you to have our press release in front of you, which includes our financial results as well as metrics and commentary on the quarter. Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2025. Our comments and responses to your questions reflect management's views as of today, April 29, 2026, only, and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings.

During this call, we may discuss certain non-GAAP financial measures. In our press release, slides accompanying this webcast and our filings with the SEC, each of which is posted on our IR website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures.

Our guidance incorporates the order trends that we've seen to date and what we believe today to be appropriate assumptions. Our results are inherently unpredictable and may be materially affected by many factors, including fluctuations in foreign exchange rates and energy prices, changes in global economic and geopolitical conditions, tariff and trade policies, resource and supply volatility, including for memory chips, and customer demand and spending, including the impact of recessionary fears, inflation, interest rates, regional labor market constraints, world events, the rate of growth of the Internet, online commerce, cloud services and new and emerging technologies and the various factors detailed in our filings with the SEC.

Our guidance assumes, among other things, that we don't conclude any additional business acquisitions, restructurings or legal settlements. It's not possible to accurately predict demand for our goods and services, and therefore, our actual results could differ materially from our guidance.

And now I'll turn the call over to Andy.

Thanks, Dave. We're reporting $181.5 billion in revenue, up 17% year-over-year. Excluding the $2.9 billion favorable impact from foreign exchange, net sales increased 15%. Operating income was $23.9 billion.

Q1 was a strong quarter for Amazon. Starting with AWS, growth continued to accelerate, up 28% year-over-year, the fastest growth rate in 15 quarters, up $2 billion quarter-over-quarter, the largest Q4 to Q1 AWS revenue increase ever. AWS is now a $150 billion annualized revenue run rate business. It's very unusual for a business to grow this fast on a base this large. And the last time we saw growth at this clip, AWS was roughly half the size.

We've never seen a technology grow as rapidly as AI. Amazon is already a leader and companies continue to choose AWS for AI. To put our growth in perspective, 3 years after AWS launched, we had a $58 million revenue run rate. In the first 3 years of this AI wave, AWS' AI revenue run rate is over $15 billion, nearly 260x larger.

There are several reasons customers are choosing AWS for AI. First, we've built broader capabilities than others. That includes model building with SageMaker, which reduces training time by up to 40%; high-performance inference with the leading selection of frontier models in Bedrock, which saw 170% growth in customer spend quarter-over-quarter; and processed more tokens in Q1 than all prior years combined.

We're excited to make OpenAI's models available in Bedrock. Yesterday, we added OpenAI's GPT 5.4 model with 5.5 coming soon. Yesterday, we also started the preview of Amazon Bedrock managed agents powered by OpenAI, a stateful run time environment that enables any organization to build generative AI applications and agents at production scale. We believe that modern agentic applications will be stateful, and this new technology will rapidly accelerate Agentic AI adoption. OpenAI has said they're already seeing unprecedented demand for this new product, and we're seeing heavy customer interest as well.

Most of the value companies derive from AI will be through agents, and AWS customers can build agents with their proprietary data and strands, which has been downloaded more than 25 million times and saw 3x more downloads quarter-over-quarter. Customers can deploy agents with enterprise scale, security and reliability with AgentCore, which is being used to deploy an agent as frequently as every 10 seconds. We also offer turnkey agents for coding software migrations, business operations and knowledge workers in Kiro, Transform, Connect and Quick, and they continue to resonate with customers. The number of developers using Kiro more than doubled quarter-over-quarter, and enterprise customer usage increased nearly 10x. Customers have used Transform to save over 1.56 million hours of manual effort when migrating and modernizing their workloads. A number of new customers using Quick has grown more than 4x quarter-over-quarter, and we just announced day 1 of our Quick desktop app yesterday. It's very compelling as it can query your e-mail, calendar, Slack, local files and several other applications you use every day to flag important communications, retrieve and summarize information, make recommendations, compose and send communications to others and create agents that highlight or automatically do work that you used to have to do yourself. You can easily keep refining your preferences, and Quick's advanced Knowledge Graph enables the AI agents to automatically learn from your interactions to become more personalized over time. One of our enterprise customers just told us Quick isn't just improving how we work, it's letting us reimagine it.

Second and another reason customers continue choosing AWS is that as they expand their use of AI, they want their inference to reside near their other applications and data and much more of it resides in AWS than any place else. Third, as customers expand their AI usage, they also want to consume additional non-AI services, and they're choosing AWS because we've built the broadest and most capable core offerings by a wide margin. We offer thousands of features across compute, storage, databases, analytics, security and more, and Gartner consistently recognizes AWS' leadership across their major cloud evaluation areas. Fourth, AWS is the strongest security and operational performance of any AI and infrastructure provider. And start-ups, enterprises and governments continue to choose AWS as the foundation for their most critical workloads.

These are some of the reasons even more customers are choosing AWS. And just since last quarter's call, we've announced new agreements with OpenAI, Anthropic, Meta, NVIDIA, Uber, U.S. Bank, Fox, Southwest Airlines, U.S. Army, Bloomberg, Cerebrus, AT&T, Nokia, Fundamental, The National Geographic Society, PGA Tour and many more.

Our chips business continues to grow rapidly and is larger than what a lot of folks thought. We saw nearly 40% quarter-over-quarter growth in Q1, and our annual revenue run rate is now over $20 billion and growing triple-digit percentages year-over-year. But this somewhat masks the size. If our chips business was a stand-alone business and sold ships produced this year to AWS and other third parties as other leading chip companies do, our annual revenue run rate would be $50 billion. As best as we can tell, our custom silicon business is now one of the top 3 data center chip businesses in the world. The speed at which we've gotten here is extraordinary.

And we have momentum. For our custom AI silicon, we've recently shared very large multiyear multi-gigawatt training commitments from the 2 leading AI labs in the world, Anthropic and OpenAI, as well as an increasing number of companies like Uber betting on Trainium. And we now have over $225 million in revenue commitments for Trainium. Our Trainium 2 chip has about 30% better price performance than comparable GPUs and is largely sold out. Trainium 3, which just started shipping at the start of 2026 and was 30% to 40% more price performance than Trainium, 2 is nearly fully subscribed. And Trainium 4, which is still about 18 months from broad availability, has already been reserved. Amazon Bedrock, which is used expansively by over 125,000 customers, runs most of its inference on Trainium. Almost 80% of the Fortune 100 companies are using Bedrock.

We also just announced that Meta is committed to using tens of millions of Graviton cores. Graviton is our industry-leading CPU chip, which allows Meta to run the CPU intensive workloads behind agentic AI with the performance and efficiency they need at their scale. AI is commonly seen as a GPU story. But the rise of agentic workloads, real-time reasoning, cogeneration, reinforcement learning and multistep task orchestration is driving massive CPU demand as well. As AI systems shift from answering questions to taking actions, it is post training an inference scale up the compute required pulls heavily on CPUs. That's why Meta chose Graviton, which delivers up to 40% better price performance than any other x86 processors, and now used by 98% of the top 1,000 EC2 customers. Nobody has a better set of chips across AI and CPU workloads than AWS with Trainium and Graviton. And we're unusually well positioned for this AI inflection we're in the early stages of experiencing.

While the largest number of AI chips we're bringing in are Trainium, we continue to have a deep partnership with NVIDIA. We have immense respect for them, continue to order substantial quantities. We'll be partners for as long as I can foresee, and we'll always have customers who want to run NVIDIA on AWS. And we will also have a very large chips business ourselves. Customers always want choice. It's always been true and always will be true. Different companies will offer different benefits for customers. And the uniquely strong price performance that Trainium offers is compelling to our external and internal customers.

For perspective, at scale, we expect Trainium will save us tens of billions of dollars of CapEx each year and provide several hundred basis points of operating margin advantage versus relying on other chips for inference.

Finally, we continue to be confident in the long-term CapEx investments we're making. Of the AWS CapEx we intend to spend in 2026 much of which will be installed in future years, we have high confidence that this will be monetized well as we already have customer commitments for a substantial portion of it and that it will yield compelling operating margins and ROIC. As we've been sharing, the faster AWS grows, the more short-term CapEx we'll spend. AWS has to lay out cash for land, power, buildings, chips, servers and networking gear in advance of when we can monetize it, typically 6 to 24 months before we start building customers depending on the component. However, these CapEx investments fund assets with many year useful lives, 30-plus years for data centers, 5 to 6 years for chips, servers and networking gear. The free cash flow and ROIC for these investments are cumulatively quite attractive a couple of years after being in service. However, in times of very high growth like now, where the CapEx growth meaningfully outpaces the revenue growth, the early year's free cash flow is challenged until these initial tranches of capacity are being monetized and revenue growth outpaces CapEx growth. We've been through this cycle with the first big AWS growth wave and like the results. We expect to feel similarly about this next wave with much larger potential downstream revenue and free cash flow.

I'll now turn to stores. Units grew 15% year-over-year, and the highest we've seen since the tail end of COVID lockdowns. We continued expanding selection, including more than 600 new notable brands. Our grocery business continues to grow quickly across both perishables and nonperishables. And with more than $150 billion in gross sales in 2025, we're now the second largest grocer in the U.S. We offer perishables delivered same day alongside millions of other items in more than 2,300 cities and towns across the U.S. with more to come. Prime members are loving the convenience of getting fresh groceries alongside other products they're buying in Amazon. And perishable sales have grown over 40x year-over-year, and make up 9 of the top 10 most ordered items for same-day delivery where the service is available. Customers shopping same-day perishables build larger baskets, adding nearly 3x as many items to their order, and has spent over 80% more than customers who don't.

Whole Foods market also continues to accelerate with over 550 stores today and 100 more coming in the next few years. We remain committed to meeting or beating other retailers on price. And in Q1, the average prices of products offered on Amazon.com decreased compared to the same period last year. Prime Day will take place in most countries in June, which will bring Prime members even more savings across every category.

We continue to find new ways to speed up delivery for customers in both cities and rural areas. We offer millions of items available for same-day delivery with Prime, up to 40x the selection of a typical big box retail store, and we've delivered more than 1 billion items same-day overnight so far this year.

We're also making delivery even faster, recently announcing 1- and 3-hour delivery options on over 90,000 items with 1-hour delivery available in hundreds of cities and towns, 3-hour delivery in 2,000-plus cities and towns and more on the way. And we continue to expand our ultrafast delivery service, Amazon Now, which offers delivery in 30 minutes or less on thousands of items. It started last year in India, where orders are increasing 25% month-over-month with Prime members tripling their shopping frequency once they start using it. The service is now available to tens of millions of customers across 9 countries with more to come as well.

The stores team also continues to innovate and deliver for customers with AI. We launched Health AI, a 24/7 AI-powered personal health agent backed by One Medical clinicians that gives U.S. customers instant clinical guidance and takes action with their permission, from booking appointments to managing prescriptions to facilitating medical treatment with a real One Medical provider. Rufus, our agentic AI shopping assistant, continues to resonate with customers. Rufus can research products, track prices and auto buy products in our store when they reach a set price. Monthly active users are up over 115%, and engagement is up nearly 400% year-over-year.

And we recently introduced a new AI experience for sellers at Seller Central that dynamically generates a custom personalized visualization of data, key insights and scenarios tailored to the seller's goals. It's early, but the initial response and feedback are very strong.

Moving on to Amazon Ads. We continue working to be the best place for brands of all sizes to grow their businesses, and we're pleased with the continued strong growth across our full funnel offerings, generating $17.2 billion of revenue in the quarter and up 22% year-over-year. Forrester recently recognized Amazon Ads as a leader in omnichannel advertising platforms with unmatched supply and insights for connected TV and commerce media. We deepened our Netflix partnership with Amazon Audiences, which enables advertisers to apply Amazon's exclusive signals from shopping, browsing and streaming to Netflix's highly engaged viewers to reach the right audiences and drive even stronger performance. We also partnered with Comcast Advertising to expand local advertising to thousands of brands and expanded interactive video ad capabilities to partners starting with Samsung TVs.

Our ads team also continues to invent and deliver for advertisers with AI. For example, we expanded creative agent, an agentic partner that plans and executes the entire ad creative process to Canada, France, Germany, India, Italy, Spain and the U.K. And we recently introduced sponsored product and brand prompts in Rufus to help brands showcase products and customers make more informed buying decisions. It's early but we're seeing nearly 20% of shoppers who interact with the brand prompt in Rufus continue the conversation about that brand.

We're also continuing to invent and see momentum in several other areas. I'll mention a few. Starting with entertainment. Moviegoers have flocked to Project Hail Mary with nearly $615 million in global box office to date. Its opening weekend was the second biggest for any non-sequel non-franchise film in the last decade. We also surpassed 100 million viewers globally for the Copolla's movie Trilogy, with all 3 films reaching #1 in more than 170 countries at launch. In live sports, we offered exclusive coverage of the NBA SoFi play with total viewership up 18% compared to last year on cable.

Alexa Plus early access expanded to millions more Prime members in Mexico, the U.K., Italy and Spain. Customers are loving Alexa Plus, talking to Alexa twice as much and for longer durations across a wider breadth of topics, completing purchases on devices 3x more, streaming music 25% more and using smart home functionality 50% more than Alexa Classic.

Zoox has now driven nearly 2 million miles and carried more than 350,000 riders. It's available to the public in Las Vegas and San Francisco, and is testing in 8 other cities. We recently announced that Zoox will be available through the Uber app in Las Vegas and Los Angeles in the future.

And finally, Amazon Leo continues gaining momentum with commercial service on track to launch in a few months. We already have meaningful revenue commitments from enterprises and governments, including Delta Airlines, JetBlue, AT&T, Vodafone, DIRECTV Latin America, Australia's national broadband network, DP World Tour, NASA and others. We also announced that we plan to acquire Globalstar, which will expand Leo's satellite network with direct-to-device capabilities. And we entered an agreement with Apple for Amazon Leo to power satellite services for iPhones and Apple Watches.

We're in the middle of some of the biggest inflections of our lifetime. And Amazon has the culture, the know-how and the resources to make so many customers' lives better and easier and to build multiple new long-term businesses with substantial return on invested capital and free cash flow. We will continue investing in inventing to make it so.

With that, I'll turn it over to Brian.

Thanks, Andy. Let's start with our top line financial results. Worldwide revenue was $181.5 billion, a 15% increase year-over-year, excluding the 180 basis point favorable impact of foreign exchange. Worldwide operating income was $23.9 billion with an operating margin of 13.1%, our highest operating margin ever.

Across all segments, we continue to innovate for customers while operating more efficiently. In the North America segment, first quarter revenue was $104.1 billion, an increase of 12% year-over-year. International segment revenue was $39.8 billion, an increase of 11% year-over-year, excluding the impact of foreign exchange. The seasonal shopping events performed well in Q1, including our big spring sale. We also saw particularly strong performance for third-party sellers for important contributors to our broad selection and competitive pricing. Our sellers saw strong sales growth in Q1, particularly in the U.S. as well as in Europe and Brazil, where we've recently lowered seller fees. We're seeing our investments in the seller experience resonate and in turn, grow our business.

Prime continues to fuel our growth and reflects the value members received from the program. Prime Video is a key pillar of the Prime value proposition and an important driver of new member acquisition. Our investments in Original and Exclusive Content and Live Sports, combined with our third-party partner titles, offer the best selection of premium video content. In addition to delivering compelling value to Prime members, advertisers and partners, Prime Video is now large and profitable business in its own right.

Now let's shift to segment profitability. North America segment operating income was $8.3 billion with an operating margin of 7.9%. International segment operating income was $1.4 billion, with an operating margin of 3.6%. We are pleased with the fulfillment network performance in Q1. The team has worked hard to optimize our network. Overall unit growth of 15% continues to outpace our cost to operate the fulfillment network as outbound shipping costs grew 12% year-over-year and fulfillment expense grew 9% year-over-year, both on an FX-neutral basis. As our network efficiency improves, we're able to deliver items faster and improve the customer experience, while at the same time lowering our cost to serve.

Looking ahead, we see meaningful opportunities to further enhance productivity across our global fulfillment network, all while continuing to raise the bar and delivery speed. We will keep optimizing inventory placement to shorten distance traveled, reduce touches per package and improve consolidation rates.

Alongside these efforts, we deploy robotics and automation, which have been integral to our operations for decades. Our latest generation technologies offer a step change in efficiency, which we're deploying in both new and existing facilities. All of our U.S. large-format fulfillment center launches in 2026 will have this latest generation technology. We're seeing early positive results with improved site safety, higher productivity and lower cost to serve.

Moving to our AWS segment. Revenue was $37.6 billion, and growth accelerated 480 basis points to 28% year-over-year, driven by both core and AI services. We continue to see customers increase cloud migrations and scale their use of AWS core services. Customers seeking the full benefit of AI are accelerating their transition to the cloud. We also see a strong correlation between AI spend and core growth. If customers spend more on AI, we see a corresponding demand increase in core. We expect this to increase over time as customers move more AI workloads into production, strengthening demand for our core services. Our AI revenue is growing triple digits year-over-year. We're bringing more capacity online to meet high customer demand while also driving meaningful efficiency gains across our installed base.

Our AI offerings continue to gain traction with customers, and Bedrock has been a significant growth driver. In 2025, we delivered 4x improvements in Trainium 2's token throughput. Since the majority of Bedrock's workloads run in Trainium, these efficiency gains directly translate into more capacity to serve customers. AWS operating income was $14.2 billion and reflects our strong growth, coupled with our focus on driving efficiencies across the business.

Now turning to total company capital expenditures. Our cash CapEx is $43.2 billion in Q1. This primarily relates to AWS and generative AI as we invest to support strong customer demand. We'll continue to make significant investments, especially in AI, as we believe it to be a massive opportunity with the potential to drive long-term revenue and free cash flow.

I'll finish with our financial guidance for Q2. The following guidance assumes that Prime Day occurs in the second quarter in most of our largest geographies, including the U.S., and that Prime Day occurs in the third quarter in Australia, Brazil, India and Japan. Note that in 2025, Prime Day was in Q3 for all countries.

Q2 net sales are expected to be between $194 billion and $199 billion. We estimate the year-over-year impact of changes in foreign exchange rates based on current rates, which we expect to be a headwind of approximately 10 basis points in the quarter. Q2 operating income is expected to be between $20 billion and $24 billion. We continue to see strong sales trends carrying into Q2, and I'll mention a few items on the operating income guidance.

First, this estimate includes the impact of our seasonal step-up in stock-based compensation expense in Q2 driven by the timing of our annual compensation cycle.

Second, within the North America segment, we do expect a year-over-year cost increase of approximately $1 billion related to Amazon Leo as we manufacture and launch more satellites in preparation for our service offering. Amazon Leo's commercial service is on track to launch in Q3, and we expect to begin capitalizing certain costs in Q4, including production and launch costs.

Third, our guidance anticipates higher transportation costs related to fuel inflation, which is partially offset by the recently implemented fuel and logistics-related FBA surcharge.

I'm thankful to our teams across the company for their hard work and dedication to customers. We remain focused on driving an even better customer experience, which is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.

Thank you. At this time, we will now open the call up for questions. [Operator Instructions] And the first question comes from the line of Eric Sheridan with Goldman Sachs.

Andy, across an array of announcements you've made recently with AWS and reflecting upon what you wrote in the shareholder letter, can you talk a little bit about the needed levels of investment over the next couple of years to scale compute and capacity to meet your current state of revenue backlog and how we should be thinking about your unique approach to custom silicon and AI infrastructure that maybe positions you competitively to build that scale?

Yes. Well, to your point, Eric, we've made a lot of announcements over the last several months, and we're really pleased with the growth that we're seeing in AWS right now, 28% year-over-year, fastest growth rate in 15 quarters for us, haven't grown at this pace since we're about half the size. And growing 28% on a $150 billion annual run rate basis is not simple to do. And I think there's a few things around it.

First is just we continue to see people choosing AWS for AI in part because of our really broad full stack functionality, in part because people want their inferences, they scale it to be close to their data and their applications so much more that it lives in AWS and elsewhere. And in part because we have a strong security and operational performance. And that's just -- you can see it in our numbers, it's leading to very substantial AI growth. And then at the same time, we're seeing very significant growth in our core business. And some of that are the migrations that have picked up from enterprises from on-premises to the cloud. But a lot of that is also as AI growth is exploding, it turns out that it leads to a lot of core growth as well. All the post training, all the reinforcement learning, all the agentic actions and tool usage that these agents are using, and it fits with what you're asking about on the chip side, which is because we have an unusual collection of chips, we have the leading CPU chip and Graviton and we have the leading price performance silicon, AI chip and Trainium, it means that we're really unusually well positioned for the inflection that we're seeing and the type of growth that we're experiencing.

And so I don't have an update on -- a new update on capital. Our plan is largely the same, but we do view this as truly a once-in-a-lifetime opportunity where every application that we know of is going to be reinvented. And there are so many new applications that none of us have ever imagined or dreamed we could build, that are starting to be built and will be built. And all of that is going to be built on top of AI with a lot of consumption of CPUs and core as well. So I think -- I expect that we will invest a significant amount of capital over the coming years to pursue that opportunity. And that our customers, our shareholders and Amazon in general are going to be much better off down the road because we did so.

And the next question comes from the line of Brian Nowak with Morgan Stanley.

I have 2. One is on the accounting side, we'll probably get it in the queue, but can you just give us an update on what the AWS backlog looks like? And sort of any visibility on the breadth of that backlog beyond the big labs? That's the first one.

And then the second one. As you sort of think about milestones for Rufus and agentic commerce for you in 2026, what are you most focused on making sure you accomplish on the agentic side this year just to make sure you stay at the nice edge of the agentic commerce offerings?

Yes. On the backlog, the backlog for Q1 is $364 billion. That does not include the recent deal that we announced with Anthropic for over $100 billion. There's reasonable breadth in that as well. It's not just one customer or 2 customers.

On the agentic commerce milestone question. We are very bullish on what agentic commerce will look like. I think it's going to be very good for customers in the long term. I think it will be good for us, too. And you can see some of that focus from us and what we're building with Rufus. If you haven't checked out Rufus in a while, it's really substantially improved over the last year, and we have a lot of customers using it. As I mentioned, earlier, you see the monthly active users up over 115% in Rufus and the engagement up over 400% year-over-year. And I think while I think there will be -- we'll do a lot of work with third-party horizontal agents to try and make that customer experience better -- and by the way, I do think today, it reminds me in some ways the stage we're in of what we saw in the early days of search engines and they're trying to refer business to e-commerce. It's never been a giant part of the referrals to our e-commerce business. But over the years, the experience got better. And what you see with agentic commerce is it's a small fraction of what we see with the search engine referrals, but the experience just hasn't gotten great with these third-party horizontal agents yet. They're not often able to get the pricing right or the product information right. They don't have any personalization data or any shopping history. And so we do want to see that get better with third-party horizontal agents. We're having conversations with all those folks to try and make that better and find something that works for customers and all the companies. And then it will be interesting over time which agents customers choose to use.

I happen to think that if you're going to a particular retailer that you'd like to do business with and you like to shop from, if they have a great agentic shopping assistant, you're going to often start there because it's where you're doing your shopping, it's easier to -- they have better product information, they have better information about what are the customers like you are buying. You can make all sorts of changes to how your account and your shipping information is working there. And so that's what we're aiming to make Rufus be is we're aiming to have it be the best shopping assistant anywhere, and I think we're on that path.

The next question comes from the line of Justin Post with Bank of America.

I'd like to ask 2. One on models and then one on Trainium chips. So on models, it looks like you might have access to the full suite of OpenAI models on Bedrock. Just wondering how big of an unlock that is and how focused maybe you are on your own Nova model?

And then second, shareholder letter mentioned you might be able to sell racks of Trainium. Just wondering, with your capacity constraints, how you think about timing of that? And how big of an opportunity?

Yes. On the models question, I think the fact that we're going to have all the OpenAI models available in Bedrock is a big deal. It's a big deal for customers. And we have -- we obviously have a very large amount of AI being done in Bedrock today on the models we have. And this is Anthropic and [ Lama and Strong ] and a host of others. But the one thing you learn over and over again with every technology, it was true in databases, it was true in analytics, it's true in models. It's true in chips too, by the way, is that customers want choice. There is not one tool to rule the world, and they want choice. And each of the models are better at some things than the other models. And so people for a long time have wanted to consume OpenAI models in Bedrock. We just enabled yesterday the stateless model, the 5.4 model and will enable the most recent 5.5 model in the next couple of weeks. And most of the model work and most of the AI has been done in these stateless models, kind of tokens in and tokens out. And while I think there will continue to be a lot of work on that way, I think the future of using these models is a stateful model, a stateful API. And that's because when you're building agents, you're building AI applications, you don't want to start anew every time you interact with the model. You want to store state, you want to you want to store identity, you want to store what the conversation or the actions have been. You want to reach out and do a little bit of compute here. You want to have the tools to be able to reach -- the models reach out to the different tools to accomplish different tasks. And that only happens if you're able to store state. And so the Bedrock-managed agents that we collaborate with and invented with OpenAI that we just announced a preview of yesterday is also -- I think that's the future of how these agents are going to be built. It's something that nobody else has. And I think it's very exciting to our customers. And of course, we'll have other models like codecs and things like that as well. So I think it's a big deal for customers, and I think it's going to be good for our business as well.

On the question about Trainium and the notion of our selling racks over time, I do think that's very much a possibility. Always, we have to balance -- we have such demand right now for Trainium, and we have such demand from various companies who will consume as much as we make that we have to decide how much we're going to allocate to the existing demand and customers how much we're going to save to sell these racks. And for our existing customers that we sell Trainium to, how many would be Trainium plus running on our cloud infrastructure versus just the chips themselves. But I expect over time, there's a good chance we're going to sell racks over the next couple of years.

And the next question comes from the line of Rob Sanderson with Loop Capital Markets.

I wanted to ask a little bit about Amazon Leo. Can you maybe help dimensionalize some of the revenue opportunity in the consumer and in the enterprise space over the next few years. What are the governors on the ramp? Could you talk about types of new services that you will be able to develop with the Global Star infrastructure and the spectrum that maybe you couldn't address before or would take you, you can get to more quickly now.

And then how expansive is the longer-term vision? I know you're just beginning to launch commercial services, but over the long term, do you expect to include noncommunication services like -- data centers or things like that as this becomes feasible in the decade ahead?

Yes, I'll try and address as many of those questions as I can. I am very bullish about Amazon Leo and the opportunity there. There are billions of people around the world who do not have access to broadband connectivity. And there are many thousands of businesses and government assets that just -- that people don't have visibility to because they don't have the right connectivity. And it means that those entities can't do a lot of the things that we all take for granted today, including education online business online, shopping or entertainment online, having constant visibility and digital twins. There's all these things that they can't do today. And so we think that Amazon Leo is going to help solve that problem. I think when we launched our service commercially, we've got -- we just had another launch this week, so we have over 250 satellites in space. When we launched that service commercially, it will be one of 2 offerings that are on the current technology edge. And I think that we will have a meaningful advantage and performance, I think, will be about 2x better on the downlink than existing alternatives at about 6x better on the uplink performance than existing alternatives. I think we'll have a cost advantage for customers.

And then for the governments and the enterprises, and we talk to a lot of them, and we have already signed agreements with many of them, even though we haven't launched the service commercially, the latest of which was Delta Airlines committing at least half of their fleet starting in 2028. When you talk to them another really big part of what matters them is they're going to want to take this data off of the satellite constellation and they're going to want to store it in the cloud and they're going to want to do analytics on it and they're going to want to do AI on it. And just the combination of Leo with the leading cloud in the world in AWS is very compelling to enterprises and to government.

So I think the are only -- today, if you ask what stops us from growing the business, we have to get the constellation into space. We have over 20 launches planned. This year, we have over 30 launches planned in 2027. But I think the business has a chance to be a very large, many billion dollar revenue business. And I think it has some characteristics that are reminiscent of AWS in that it's capital intensive upfront, where you're committing a lot of capital and cash in the early years for assets that you get to leverage over a long period of time. And so I like the free cash flow and return on invested capital characteristics of that business in the medium to long term.

And the last thing I'll say about it is your question about Globalstar. Increasingly, what we're finding with consumers and enterprise and governments is that they don't like to have any periods where they don't have connectivity. It just upsets whatever customer experience they're going through. Even in metropolitan areas, we all hit certain parts of the highway or certain roads where you can't get connectivity or you're hiking, you're skiing. And so increasingly, we see very large demand for consumers to have direct to device. And that was really the impetus for our acquisition of Globalstar. They have unusual and scarce global spectrum that's required to provide direct to device. We also really like the satellite know-how that we'll get as part of that merger with Globalstar. And then it also afforded us the opportunity to build a deep relationship with Apple, who is going to use our direct to device for their iPhones and for their Watches. So very optimistic about the business.

And the next question comes from the line of Shweta Khajuria with Wolfe Research.

I wonder, Andy, if you could please talk about how you're thinking about the increase in price for memory and storage and just the supply chain inflation we're seeing and the impact it could have in CapEx this year and potentially next year as well?

And then on agentic commerce, if you could talk about how you view the opportunity with advertising. I have no doubt that Rufus could be the best shopping assistant available over time. But for advertising opportunity, how do you view that if agents would be the ones taking action to shop

So on memory and storage and the supply chain, I think everybody knows that the cost of these components, particularly of memory, have skyrocketed, and we're just in a stage where there's just not enough capacity for the amount of demand. We have worked very closely with our strategic partners. We saw this trend happening early in the kind of the middle of the latter part of last year, and we've worked with our strategic suppliers here to get a significant amount of supply. And so we're working very closely with them. I think the team has been very scrappy. I think we've done a good job in making sure that we're not capacity constrained there, but we watch that very closely.

One of the interesting things that we see right now with the change in price and in supply on things like memory is that it is a further impetus pushing companies who have on-premises infrastructure into the cloud. And it's because of a meaningful part, the suppliers are prioritizing their very largest customers, which cloud providers are. And so we have seen a number of conversations we've been having with enterprises for many months where it's just been slower in getting the transformation plan to move to the cloud, accelerate rapidly just because we have a lot more supply than what others have. So it'd be interesting to see how that evolves over time. It could have -- we're doing our best to kind of -- to have the supply we need and keep the cost in the right spot, but we'll see how that continues to evolve.

And I think on the agentic commerce and how that impacts advertising, I actually believe that we're going to we're going to like this for advertising. I think it's going to be good for customers, and it's going to be good for our business. And I think, first of all, the first thing to remember is the way that our ads team has built tools and agents themselves is making it so much easier to do advertising. If you look at small and medium-sized businesses that had to take weeks and months to do creative and to pick the right audience, but all of that is just -- it's so much faster and so much easier because of our advertising agentic tools. And you no longer have to take as much time or spend as much money building the creative. So I think they're going to be a lot more advertising -- advertisers with the rise of what's happening in AI.

And then if you look at the agentic commerce experiences, and you look at any of these agentic experiences, they tend to be multiturn conversations where you're not interacting with one search and getting an answer, you tend to find that you're asking questions, you're narrowing questions, it's asking you questions on what you want. And in that process of having multi turns, there are multiple opportunities to surface relevant products to customers, many of which will be organic and some of which will be sponsored. And it also gives rise to opportunities like sponsored prompts. And so one of the interesting things that has been very successful for customers in our store has been when they ask certain questions, we give them a number of suggestions that are all created through AI. And we've gotten pretty good also having sponsored prompts and that mix of questions and prompts to make it easy for people to keep digging deeper into what they're interested in. So I actually believe that advertising will do well in a world of agentic commerce.

Thank you. And our final question comes from the line of Colin Sebastian with Baird.

Maybe a 2-parter, if I could. Andy, first off, just wondering where you're seeing in terms of the trend between incremental AI demand from earlier adopters and larger AWS customers versus maybe how the demand curve is shaping up across the broader enterprise base?

And then at a high level, as you think about the use of AI internally across Amazon's businesses, presumably the business overall looks very different in 3 or 4 years. Maybe, Andy, if you could contextualize where you see the most opportunity for the technology internally, both in terms of product as well as maybe driving more operating efficiency, I think that would be helpful.

Yes. So on the -- what we see in the incremental AI demand from early adopters versus broader enterprise base, there's -- I think it's no secret that you've got the AI labs are spending an incredible amount of money on compute at this point -- in compute, both on the AI side as well as on the core side. And the models that they're building and the companies that have successful generative AI applications are certainly spending a lot. And there's several of those labs, but we also see quite a bit of enterprise adoption and usage of AI. As I've said before, the gorgeous absolute place that we see enterprises having success is in projects that are around cost avoidance and productivity. These are things like automating customer service or business process automation or fraud or things of that sort. But the number of projects that we're working with across enterprises and that we're now starting to see come to production around brand-new experiences, trying to figure out how to reinvent their current experiences but using inference and AI to be smarter -- also very significant. So we're seeing the adoption of both of those segments.

On the use of AI internally and for our current businesses, I think that the shortest first summary I could give you, Colin, is that I do not see a place in any of our businesses or any of the ways that we do work where we're not going to have giant impact on what we do. I think I've long had this belief that while you can add incrementally to a lot of your existing customer experiences, different agentic and AI experiences. I really believe that in the fullness of time, and I don't know if that's 3 years from now or 5 years from now or it could be sooner, too, that all these customer experiences we know are going to be completely reinvented. And they're going to have different interfaces. They're going to have different ways that people interact with them. They're going to -- people are going to want to have dialogue with them. And so I think it means that you have to look -- it's tricky for if you have an existing business that's doing well. But you have to look at every single one of your customer experiences and you have to be able to carve off resource for that team to think anew about what would the future customer experience look like. If you start from scratch today and if you had all the technologies like AI available to you when you start it. And that is what we're doing in every single one of our experiences. And if I have a chance to be involved in some of those, and it's really exciting. And there are experiences that may take a while to -- for customers to get used to and to use over time. You might find different segments like those AI-forward experiences more than others early on. But if you're not actually working on inventing those right now, I think it's going to be very hard to have the business and the experience leadership that we want over a long period of time. So every single one of our consumer businesses, every single one of our businesses in general is working on that.

And then I would say internally, I also think that it's going to radically change how we work. It already is. I mean just look at how coding, agentic coding is changing how we're all building products. I think it's going to have a comparable impact on how we do DevOps and how we do customer service, how we do research, how we do analytics, how sales is conducted. I think every single one of these functions that we all do at work are going to very significantly change. And that's another area of real focus for us.

And we have this experience. I mentioned in my letter, but if you look at one of our services, we swapped out the engine of the service while we are also running the service full tilt. And normally, that would have taken 40 or 50 people about a year to do, and we took 5 really smart people, AI forward-thinking people building on agentic coding tools, and those 5 people rebuilt it in 65 days. Like that is a very different world of operating, and that's the world I think we're heading to over the next few years.

Thanks for joining us on the call today and for your questions. A replay will be available on our Investor Relations website for at least 3 months. We appreciate your interest in Amazon and look forward to talking with you again next quarter.

Thank you for standing by. Good day, everyone, and welcome to the Amazon.com Fourth Quarter 2025 Financial Results Teleconference. [Operator Instructions] Today's call is being recorded.

And for opening remarks, I will be turning the call over to the Vice President of Investor Relations, Mr. Dave Fildes. Thank you, sir. Please go ahead.

Hello, and welcome to our Q4 2025 financial results conference call. Joining us today to answer your questions is Andy Jassy, our CEO; and Brian Olsavsky, our CFO.

As you listen to today's conference call, we encourage you to have our press release in front of you, which includes our financial results as well as metrics and commentary on the quarter. Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2024. Our comments and responses to your questions reflect management's views as of today, February 5, 2026, only, and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings.

During this call, we may discuss certain non-GAAP financial measures. In our press release, slides accompanying this webcast and our filings with the SEC, each of which is posted on our IR website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures.

Our guidance incorporates the order trends that we've seen to date and what we believe today to be appropriate assumptions. Our results are inherently unpredictable and may be materially affected by many factors, including fluctuations in foreign exchange rates and energy prices, changes in global economic and geopolitical conditions, tariff and trade policies, resource and supply volatility, including for memory chips and customer demand and spending, including the impact of recessionary fears, inflation, interest rates, regional labor market constraints, world events, the rate of growth of the Internet, online commerce, cloud services and new and emerging technologies and the various factors detailed in our filings with the SEC. Our guidance assumes, among other things, that we don't conclude any additional business acquisitions, restructurings or legal settlements. It's not possible to accurately predict demand for our goods and services, and therefore, our actual results could differ materially from our guidance.

And now I'll turn the call over to Andy.

Thanks, Dave. We're reporting $213.4 billion in revenue, up 12% year-over-year, excluding the impact from foreign exchange rates. Operating income was $25 billion and trailing 12-month free cash flow was $11.2 billion.

We're seeing strong growth and with the incremental opportunities available to us in areas like AI, chips, low earth orbit satellites, quick commerce and serving more consumers' everyday essentials needs, we have a chance to build an even more meaningful business in Amazon in the coming years with strong return on invested capital, and we're investing to do so.

We're already seeing strong demand in these areas even in these early innings. I'll start with AWS. AWS growth continued to accelerate to 24%, the fastest we've seen in 13 quarters, up $2.6 billion quarter-over-quarter and nearly $7 billion year-over-year. AWS is now a $142 billion annualized run rate business, and our chips business, inclusive of Graviton and Trainium is now over $10 billion in annual revenue run rate, growing triple-digit percentages year-over-year. As a reminder, it's very different having 24% year-over-year growth on a $142 billion annualized run rate than to have a higher percentage growth on a meaningfully smaller base, which is the case with our competitors. We continue to add more incremental revenue and capacity than others and extend our leadership position.

We're continuing to see strong growth in core non-AI workloads as enterprises return to focusing on moving infrastructure from on-premises to the cloud, along with AWS having the broadest functionality, strongest security and operational performance and most vibrant partner ecosystem. AWS continues to earn most of the big enterprise and government transitions to cloud.

Since our last call, we announced new agreements with OpenAI, Visa, the NBA, BlackRock, Perplexity, Lyft, United Airlines, DoorDash, Salesforce, U.S. Air Force, Adobe, Thomson Reuters, AT&T, S&P Global, National Bank of Canada, the London Stock Exchange Group, Choice Hotels, Accenture, Indeed, HSBC, CrowdStrike, and more. More of the top 500 U.S. start-ups use AWS as their primary cloud provider than the next two providers combined.

We're adding significant EC2 core computing capacity each day, and the majority of that new compute is using our custom CPU silicon, Graviton. Graviton is up to 40% more price performance than leading x86 processors and is used expansively by over 90% of AWS' top 1,000 customers. Graviton itself is a multibillion-dollar annualized run rate business, growing more than 50% year-over-year. We consistently see customers wanting to run their AI workloads where the rest of their applications and data are.

We're also seeing that as customers run large AI workloads on AWS, they're adding to their core AWS footprint as well. But the biggest reason that AWS continues to gain AI share is our uniquely broad top to bottom AI stack functionality. In AI, we're doing what we've always done in AWS, solving customer challenges.

Let me give you some examples. The first challenge is having a strong foundation model to generate inferences or predictions. Customers are realizing as they get further into AI that they need choice as different models are better on different dimensions. In fact, most sophisticated AI applications leverage multiple models, whether customers want frontier models like Anthropic's Claude or open models like Mistral or Llama, Frontier Intelligence with lower cost and latency like Amazon Nova or video and audio models like TwelveLabs or Nova Sonic. Amazon Bedrock makes it easy to use these models to run inference securely, scalably and performantly. Bedrock is now a multibillion-dollar annualized run rate business and customer spend grew 60% quarter-over-quarter.

The second challenge is how to hone the model for your application. Customers sometimes think if they have a good model, they will have a good AI application. It's not really true. It takes a lot of work to post train and fine-tune a model for your application. Our SageMaker AI service, along with fine-tuning tools in Bedrock make this much easier for customers.

A third challenge is how to have a custom version of a foundation model that best leverages the company's secret sauce, their own data. To date, companies have tried to shape models with their own data late in the process, usually with fine-tuning or post-training. There's a debate in the industry about this, but we believe that enterprises will want models trained on their own data at an early stage of pretraining if possible. So their models have the best possible foundation for what matters most to each enterprise on which to learn and evolve. It's a little like teaching a child of foreign language early in their life. That becomes part of their learning foundation moving forward, and it makes it easier to pick up other languages later in their life.

To solve for this need, we just launched Nova Forge, which give customers early checkpoints on our Amazon Nova models, allows them to securely mix their own proprietary data with the models data in the pretraining stage and enables their own uniquely customized versions of Nova, what we call Novellas, trained with their data early in the process. This will be very useful for companies as they build their own agents on top of the model. There is nothing else out there like this today and a potential game changer for companies.

Another challenge is cost. I've said this many times, but if we want AI to be used as expansively as companies want, we have to make the cost of inference lower. A significant impediment today is the cost of AI chips. Customers are starving for better price performance. And typically, and understandably, the dominant early leaders aren't in a hurry to make that happen. They have other priorities. It's why we've built our own custom silicon and Trainium, and it's really taken off. We've landed over 1.4 million Trainium2 chips, our fastest ramping chip launch ever. Trainium2 is 30% to 40% more price performance than comparable GPUs and is a multibillion-dollar annualized revenue run rate business with 100,000-plus companies using it as Trainium is the majority underpinning of Bedrock usage today. We recently launched Trainium2, which is up to 40% more price performance than Trainium2. We're seeing very strong demand for Trainium3 and expect nearly all of our Trainium3 supply of chips to be committed by mid-2026. And though we're still building Trainium4, we're seeing very strong interest already.

Looking ahead, the primary way companies will get value from AI is with agents, some their own, some from others, and there are several customer challenges that we're well positioned to solve. It's harder to build agents than it should be. For that, we've built Strands, a service enabling agents to be created from any model. Once agents are built, enterprises are apprehensive about deploying to production because these agents need to securely and scalably connect to compute, data, tools, memory, identity, policy governance, performance monitoring and other elements. This is a new and hard problem where a solution has not existed until we launched Bedrock AgentCore. Customers are quite excited about AgentCore, and it's unlocking deployments.

Customers also want to leverage others' useful agents, and we've built several, including Kiro for coding, Amazon Quick for knowledge workers to leverage their own data and analytics, AWS Transform for software migration and Amazon Connect for call center operations. We continue adding new capabilities and usage continues to grow quickly. For example, the number of developers using Kiro grew more than 150% quarter-over-quarter.

In addition to agents that customers direct, customers are also becoming excited about agents that require less human interaction. They can be fully autonomous, run persistently for hours or days, scale out quickly and remember context. At this past AWS re:Invent, we launched Frontier Agents to do that. Kiro autonomous agents for coding tasks, AWS DevOps agents for detecting and resolving operational issues and AWS security agents for proactively securing applications throughout the development life cycle, and they're already making a big difference for customers.

We expect to invest about $200 billion in capital expenditures across Amazon, but predominantly in AWS because we have very high demand, customers really want AWS for core and AI workloads, and we're monetizing capacity as fast as we can install it. We have deep experience understanding demand signals in the AWS business and then turning that capacity into strong return on invested capital. We're confident this will be the case here as well.

I'll now turn to stores. We continue to expand selection, including more than 400 new beauty brands in the U.S. in 2025, like Bobbi Brown Cosmetics, Charlotte Tilbury and Laura Mercier and new fashion brands like Away Luggage, Converse, Diesel, Michael Kors, Nike and The North Face. Our ultra-low-priced offering, Amazon Haul, grew selection to over 1 million items under $10 and expanded to serve customers in more than 25 countries and regions.

We continue to see strong customer response to Everyday Essentials and grocery. In 2025, Everyday Essentials grew nearly twice as fast as all other categories in the U.S., representing one out of every three units sold in our store, and we've become a go-to grocery destination for over 150 million Americans, mostly through online shopping and Whole Foods. With over $150 billion in gross sales, Amazon is clearly a large grocer at this point. Customers in thousands of U.S. cities and towns can now get perishables delivered same day alongside millions of other items and customers who use that service shop more than twice as often as customers who don't. We plan to expand to many more communities in 2026, and we also plan to open more than 100 new Whole Foods Market stores over the next few years as we work to make grocery shopping easier, faster and more affordable for customers.

We remain committed to staying sharp on price and continue to meet or beat other retailers' prices. A recent study from Profitero showed that Amazon is America's lowest priced retailer for the ninth straight year, 14% lower on average than other major online retailers. We again achieved our fastest ever delivery speeds for Prime members around the world in 2025. In the U.S., we delivered nearly 70% more items same day than the year before. We also continue increasing speed for rural customers with nearly 2x more average monthly customers in rural areas receiving same-day delivery year-over-year.

Same-day is our fastest-growing delivery offering and nearly 100 million customers used it last year in the U.S. And the team is continuing to innovate. We've launched Amazon now in India, Mexico and the UAE, ultrafast delivery on thousands of items in about 30 minutes or less, and we're testing it in several communities in the U.S. and U.K. It's early, but customers are loving it. For example, in India, customer response exceeded our most optimistic expectations, and we're seeing Prime members triple their shopping frequency once they start using it.

Expanding our same-day delivery coverage also leads to meaningfully later cutoff times for orders, which is a big deal for customers. For example, on Christmas Eve, customers in about 4,000 U.S. cities could order items up until midday and get them that same day. Another example is our recently launched feature add to Delivery, which enables Prime members in the U.S. to add items to their upcoming Amazon deliveries with just one tap without going through checkout again or paying additional shipping fees.

Just six months after launch, ad to delivery already makes up about 10% of all Prime volume fulfilled through the Amazon network each week. While this seems simple on the surface, this feature is supported by a lot of invention where we need to figure out in real time and with incredibly low latency, what items among Amazon's hundreds of millions of products are available to add to a customer's upcoming deliveries, surface them, find a way to include in their packages and deliver within the same customer promise.

The stores team is also continuing to innovate and deliver for customers with AI. Our Agentic AI shopping assistant, Rufus, has rapidly expanded. Rufus can research products, track prices and auto buy, purchasing a product in our store when it reaches your set price. It can also now shop tens of millions of items in other online stores and make purchases for customers using our Agentic Buy for Me feature. Last year, more than 300 million customers used Rufus. In addition, customers use Lens, our AI-powered visual search tool to find products with a phone's camera, a screenshot or a barcode, and they did it 45% more year-over-year.

Moving on to Amazon Ads. We're pleased with the continued strong growth across our full funnel offerings, generating $21.3 billion of revenue in the quarter and growing 22% year-over-year. Sponsored products advertising in our store continues to be our largest ads offering and the combination of trillions of shopping, browsing and streaming signals with advanced AI and machine learning led us to deliver highly relevant and useful ads for customers. We saw continued growth in Prime Video ads, which is now available in 16 countries and is contributing meaningfully to our revenue growth. Prime Video has an average ad-supported audience of 315 million viewers globally, up from 200 million in early 2024.

Our ads team is also innovating with AI. We recently announced our ads agent, which lets brands use AI to create and optimize campaigns at scale, implement effective campaign targeting and quickly create actionable insights. And our creative agent lets advertisers research, brainstorm and generate full funnel ad campaigns from concept to completion using conversational guidance in Amazon's retail data, transforming what was a week-long process into just hours.

We're also continuing to invent and see momentum in several other areas, and I'll mention just a few. Starting with live sports on Prime. The fourth season of Thursday Night Football broke more records. It was our most watched season ever, averaging more than 15 million viewers, a 16% year-over-year increase and a third consecutive year of double-digit growth. And the Packers versus Bears wild card game was the most streamed NFL game in history with 31.6 million viewers, clearing the prior mark by more than 4 million.

We just made Alexa+ available to all customers in the U.S., free for Prime members and $19.99 a month for non-Prime members. Alexa+ continues to get even better and more capable, and we've added new ways to interact with Alexa, including a new chat experience at alexa.com, a redesigned mobile app and new integrations with third-party devices like Samsung TVs and BMW cars. We've also added new features like the ability to answer a ring doorbell on a customer's behalf and more ways to shop or manage a home. And finally, the team is making rapid progress on Amazon Leo, which will bring connectivity to consumers, enterprises and governments in places where they don't have broadband connectivity. Our enterprise-grade customer terminal, Leo Ultra, is the fastest satellite Internet antenna ever built, delivering simultaneous download speeds of up to 1 gigabit per second and upload speeds of up to 400 megabits per second. Leo will offer enterprise-grade performance and advanced encryption with secure private networking that bypasses public Internet connecting directly to AWS. We've launched 180 satellites, have more than 20 launches planned in 2026, more than 30 in 2027 and expect to launch commercially in 2026.

We have dozens of commercial agreements already signed, including with AT&T, DIRECTV Latin America, JetBlue and Australia's national broadband network and have many more on the way. It's been an action-packed year of innovation and progress, and we've hit the ground running in 2026.

With that, I'll turn it over to Brian for a financial update.

Thanks, Andy. Starting with our top line financial results. Worldwide revenue was $213.4 billion, a 12% increase year-over-year, excluding the 150 basis point favorable impact of foreign exchange. In Q4, we reported worldwide operating income of $25 billion.

This operating income includes three special charges, which reduced operating income by $2.4 billion. The first charge of $1.1 billion is for the resolution of tax disputes associated with our stores business in Italy and the settlement of a lawsuit. This charge primarily impacts our International segment and is largely recorded in the fulfillment and other operating expense line items. Second charge of $730 million is for the estimated severance costs. This charge impacts all three of our segments and is recorded primarily in the fulfillment, sales and marketing and technology and infrastructure expense line items. The third charge of $610 million is for asset impairments, primarily related to physical stores. This charge primarily impacts the North America segment and is recorded in the other operating expense line.

Moving on to our segment results. In the North America segment, fourth quarter revenue was $127.1 billion, an increase of 10% year-over-year. International segment revenue was $50.7 billion, an increase of 11% year-over-year, excluding the impact of foreign exchange. Worldwide paid units grew 12% year-over-year, which was our highest quarterly growth rate in 2025.

The fourth quarter marked a strong finish to the year as we delivered to customers during the peak holiday season. Our sharp pricing, vast selection and record fast delivery speeds resonated with customers. They appreciate the convenience of receiving their items quickly from gifts for family and friends to everyday essentials and perishable groceries. Our millions of global third-party sellers continue to be an important contributor to our broad selection. In Q4, Worldwide third-party seller unit mix was 61%.

We continue to invest in tools and services, including a comprehensive suite of AI tools that help our selling partners manage and grow their businesses.

Shifting to profitability. North America segment operating income was $11.5 billion with an operating margin of 9%, up from an 8% margin in Q4 of 2024. International segment operating income was $1 billion with an operating margin of 2.1%. Excluding the impact of special charges mentioned earlier, International segment operating margins also expanded year-over-year.

We're pleased with the fulfillment network performance throughout the peak season. We made strong progress improving the cost structure of our network over the past few years. In the U.S., our regionalized network is operating at scale, and we continue to make refinements. This regionalization has improved local inventory placement, leading to faster delivery at lower costs.

Last year, U.S. Prime members received over 8 billion items the same or next day, up more than 30% year-over-year, with groceries and everyday essentials making up half of the total items. For the third year in a row, globally, in 2025, we achieved both our fastest ever delivery speeds for Prime members while also reducing our cost to serve. By leveraging our existing U.S. network, we can now deliver perishable groceries to customers in more than 2,300 cities and towns, all with same-day delivery. We saw significant adoption of this service throughout the year. When customers engage with our perishable offering, they demonstrate notably higher monthly spend compared to those who do not shop the category. We also see that customers shopping perishable groceries add 3x more items to their same-day delivery orders. Looking ahead, we see further opportunity to enhance productivity in our global fulfillment network while delivering at faster speeds for customers. We will continue optimizing inventory placement to drive down distance travel, reduce touches per package and improve package consolidation as well as launch robotics and automation to increase efficiency and elevate the customer experience.

Shifting to advertising. Advertising revenue grew 22% in the fourth quarter, and we added over $12 billion of incremental revenue in 2025 alone as our full funnel advertising approach of connecting brands with customers is resonating simplifying the advertiser experience to enable brands to better reach customers wherever they are.

Moving next to our AWS segment. Revenue was $35.6 billion and growth accelerated to 24% year-over-year. We added $2.6 billion in quarter-over-quarter revenue and AWS now has an annualized revenue run rate of $142 billion. This acceleration was driven by both core and AI services as customers continue to modernize their infrastructure and migrate workloads to the cloud.

Our AI offerings continue to resonate with customers, including our agentic capabilities. This growth was helped in part by the more than 1 gigawatt of capacity we added in Q4. In 2025, AWS added more data center capacity than any other company in the world. AWS operating income was $12.5 billion. We're seeing strong top line growth while remaining focused on driving efficiencies across the business. This includes investing in software and process improvements to optimize server capacity, developing a more efficient network using our lower-cost custom networking gear and advancing custom silicon. At the same time, we continue to rapidly develop products and services on behalf of customers. As we've long said, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we're making at any point in time.

Turning to cash flows. Our full year operating cash flow increased to $139.5 billion in 2025, up 20% year-over-year due primarily to improved operating income and changes in working capital.

Now turning to our Q1 financial guidance. Q1 net sales are expected to be between $173.5 billion and $178.5 billion. This guidance anticipates a favorable impact of approximately 180 basis points from foreign exchange rates. As a reminder, global currencies can fluctuate during the quarter. Q1 operating income is expected to be between $16.5 billion and $21.5 billion.

A few things to mention on the operating income guidance. Within the North America segment, we do expect a year-over-year cost increase of approximately $1 billion related to Amazon Leo. We have more than 20 launches planned in 2026 and more than 30 in 2027, which means we're spending more on launching satellites each year. Select enterprise customers are testing Amazon Leo services now, and we expect a wider commercial rollout later this year. As a reminder, today, we do expense most of these Leo costs as incurred. We expect that later in the year, many of these costs such as satellite manufacturing and launch services will be capitalized.

Within the International segment, we're continuing to invest more in our stores business to enhance the customer experience and to encourage retail demand to move online more quickly. This includes bringing faster delivery options, including Amazon Now, our service, which delivers to customers in 30 minutes or less.

We're also working hard to stay sharp on pricing and seller fees. And there are countries where we've had to be more aggressive to meet or beat competitors' prices. We like these investments because they will delight customers, grow our business, and we believe they will generate long-term positive return on invested capital.

As we enter 2026, I'm energized by our team's strong execution. I want to thank everyone across the company for their hard work on behalf of our customers. We remain focused on driving an even better customer experience, which is the only reliable way to create lasting value for our shareholders.

With that, let's move on to your questions.

[Operator Instructions] Our first question comes from the line of Mark Mahaney with Evercore ISI.

I think, Brian, let me throw this to you or maybe to Andy. On the strong long-term return on invested capital, I think that's the debate in the market today. So could you give us a little bit more insight into how you think investors will be able to see that, either talk about the duration of the CapEx cycle that you're going through now or what we should see in terms of profitability levels?

And maybe also talk about like other de minimis or minimum free cash flow generation levels that you don't want to go below as you go through this CapEx cycle. Just help us get to that -- get to your level of confidence in having a strong long-term return on that invested capital.

Yes. Sure, Mark. Thank you. I'll start from the financial side. So on the investments we're making, as Andy said earlier, we are putting into service with customers all capacity that we're getting and it's immediately useful. And we're also seeing a long arc of additional revenue that we see from other customers and backlog and commitments that people are anxious to make with us, especially for AI services. So you can see that's working its way into our P&L, both through CapEx and also through our operating margin in AWS. AWS is 35% operating margin through Q4, up 40 basis points year-over-year.

As we talked about before, that is going to fluctuate over time. It certainly has a headwind from the investments in AI and the depreciation on that CapEx. But we also work very hard to offset that with efficiencies and cost reductions. So we will see how that develops over time. So -- but yes, we see strong return on invested capital. We see strong demand for these services, and we continue to like the investments in this area.

I would add to that. If you look at the capital we're spending and intend to spend this year, it's predominantly in AWS. And some of it is for our core workloads, which are non-AI workloads because they're growing at a faster rate than we anticipated. But most of it is in AI. And we just have a lot of growth and a lot of demand. And when you're growing 24% year-over-year with an annualized revenue run rate of $142 billion, you're growing a lot. And what we're continuing to see is as fast as we install this capacity, this AI capacity, we are monetizing it. And so it's just a very unusual opportunity.

As I've shared a lot of times, I passionately believe that every customer experience that we know of today is going to be reinvented with AI, there are going to be a whole bunch of customer experiences that none of us ever imagined that are going to become the norms of how we all operate every day and what we use.

And I think the other thing is that if you really want to use AI in an expansive way, you need your data in the cloud and you need your applications in the cloud. Those are all big tailwinds pushing people towards the cloud. So we're going to invest aggressively here, and we're going to invest to be the leader in this space as we have been for the last number of years. We have, I think, a fair bit of experience over the years in AWS of forecasting demand signals and doing it in such a way that we don't have a lot of wasted capacity and that we also have enough capacity to serve the demand that's there.

And I think we've also proven with AWS over the years in how we build data centers and how we run them and how we invent in there, if you think about our chips and our hardware and our networking gear and how we've invented in power that this isn't some sort of quixotic top line grab, we have confidence that we -- that these investments will yield strong returns on invested capital. We've done that with our core AWS business. I think that will very much be true here as well.

And I think some of the things that you will see over time in the AI space is you're going to keep seeing all of the inference services, which is going to be the majority of the long-term AI workloads is going to be inference. You're going to see the inference keep getting optimized. You're going to see higher utilization on those services. You'll see prices normalize over a period of time.

And then I think the companies that have not just the excellence in infrastructure, but also the components that give them -- give customers better price performance and give those companies themselves better economics are going to have advantaged financials. And I think if you look, we're already off to a really good start having Trainium underneath the majority of our Bedrock service. And that's not just giving customers better prices, but it also gives us better economics. And so we see that following the same sorts of patterns we saw in the early days of our core AWS investment. I'm very confident we're going to have strong return on invested capital here.

And the next question comes from the line of Doug Anmuth with JPMorgan.

Can you just talk about how Project Rainier is running with Anthropic after its first full quarter? And I think in the release, it talks about 500,000 chips, but a few months ago, you talked about getting to 1 million as well. So if you could clarify that.

And then maybe just to follow up on Mark's question. Are there any financial guardrails or governors in place that we should think about around the spend just in terms of operating income growth or positive free cash flow?

Yes. I'll start with the Trainium piece. We are very excited about the growth that we see in Trainium and the future that we have there. I think if you look at what's happened in the early innings of AI over the first few years, you see a lot of usage, but customers are really thirsty for better price performance. And Trainium has 30% to 40% better price performance than comparable GPU. So it's very compelling to customers. You mentioned Project Rainier, Anthropic is building their next -- they're training their next cloud model on top of Trainium2. And that's what Project Rainier is. So we talked about 500,000 chips there. You'll see that continuing to increase. They're also using a fair bit of Trainium2 for other workloads and their own APIs beyond just Project Rainier. But Trainium is a multibillion dollar annualized run rate business at this point, and it's fully subscribed.

And what you're also seeing is Trainium3, which is the next version of Trainium, which we just started shipping, that's 40% more price performance than Trainium2. And we have -- there is a very substantial amount of interest there. We expect that nearly all of that supply will be committed by somewhere around the middle of this year. And we're just in the process of building Trainium4. There's very substantial interest in Trainium4, which is coming in 2027. And we're already having conversations about Trainium5. So there is a lot of interest in Trainium at this point.

And I think when you -- I think people know about our chips capability and our chips business, but I'm not sure folks realize how strong a chips company we've become over the last 10 years. If you look at what we've done with Trainium, if you look at what we've done with Graviton, which is our CPU chip, which is about 40% better price performance than comparable x86 processors, 90% of the top 1,000 AWS customers are using Graviton very expansively. If you combine Trainium and Graviton, it's well over a $10 billion annualized run rate business, and it's still very early there.

So I'm very optimistic about what we're seeing. The Project Rainier has gone very well. I think Anthropic is quite pleased with it. We've learned a lot in the process as well, but it's early days with what's possible here. This is a big business that's getting bigger and has a lot of potential.

And then I just -- I'd briefly comment on your second question that we are as I mentioned, this is what -- I think this is an extraordinarily unusual opportunity to forever change the size of AWS and Amazon as a whole. I think it also is an extraordinary opportunity for companies to change all their customer experiences and for start-ups to be able to build brand-new experiences and businesses that would have taken much longer to try to accomplish before that they can do right now. And so we see this as an unusual opportunity, and we are going to invest aggressively here to be the leaders because like we've been in the last number of years and like I think we will be moving forward.

The next question comes from the line of Ross Sandler with Barclays.

Great. Andy, you mentioned a few calls back how the AI market was currently a bit top heavy with a lot of the spend kind of clustering around a few of the AI native labs. So how is that changing as you look out into '26? And specifically, how do you think you might extend your relationship with a company like OpenAI to maybe help Amazon's AI efforts, both on the retail side and the AWS side?

Yes. The way I would describe what we see right now in the AI space is it's really kind of a barbelled market demand where on one end, you have the AI labs who are spending gobs and gobs of compute right now, along with what I would consider a couple of runaway applications. And then at the other side of the barbell, you've got a lot of enterprises who are getting value out of AI in doing productivity and cost avoidance types of workloads. These are things like customer service or business process automation or some of the fraud pieces. And then in that middle of the barbell are all the enterprise production workloads. And I would say that the enterprises are in various stages at this point of evaluating how to move those, working on moving those and then putting them into production. But I think that middle part of the barbell very well may end up being the largest and the most durable. And I would put in the middle of that barbell, too, by the way, I would put just the altogether brand-new businesses and applications that companies build that right from the get-go run in production on top of AI.

And so I think that to me, when I look at this and what's happening, it's kind of unbelievable if you look at the demand of what you're seeing already with AI, but the lion's share of that demand is still yet to come in the middle of that barbell. And that will come over time. It will come as you have more and more companies with AI talent as more and more people get educated with the AI background. as inference continues to get less expensive, and that's a big piece of what we're trying to do with Trainium and our hardware strategy. And as companies start to have success in moving those workloads to -- further and further success in moving those workloads to run on top of AI. So I think there's -- it's just a huge opportunity. It's still in the relative early stages, even though it's growing at a very -- like an unprecedented clip as we've talked about.

And then I think how do we see our relationships extending with other companies like OpenAI, I would tell you that this movement in what's happening in AI is -- it's very broad. It's going to be a lot of companies. It is a lot of companies already. There's a number of AI labs, but almost every company you talk to, almost every conversation we have on the AWS side, starts with AI. And so we have very significant relationships with a lot of different companies. I think we announced an agreement with OpenAI in November. We're excited about that agreement. It's a big one. We have a lot of respect for the company, and we hope to continue to extend our partnership over time. But this AI movement is not going to be a couple of companies. It's going to be thousands of companies over time.

The next question comes from the line of Michael Morton with MoffettNathanson.

This one is on the retail business. Andy, you've talked about how you're passionate this is going to change experiences across the board. And you've shared some encouraging data points on Rufus. And we're seeing all of the other Internet platforms roll out Agentic protocols. I would love to see how you think this plays out for the retail business and the on-site ads portion of the retail business is what seems like it could be a compression in the funnel as consumers get better answers over time. Anything there would be great.

I'm very optimistic about the customer experience that will ultimately be what customers use for Agentic shopping. And I think it's good for customers. I think it's going to make it easier for them. It's a big piece of why we've invested as significantly as we have in our own shopping assistant in Rufus. And if you haven't checked out Rufus recently, I really encourage you to do so. It's gotten much, much better and keeps getting better every month. And we have about -- we have 300 million customers who used Rufus in 2025. Customers who use Rufus are about 60% more likely to complete a purchase. And so you just -- you're seeing a lot of usage of it and a lot of growth, and I think it's very useful.

And I think at the same time, we will have relationships with third-party horizontal agents that can enable shopping as well. We have to collectively figure out a better customer experience. It's still -- these horizontal agents don't have any of your shopping history. They get a lot of the product details wrong, they get a lot of the pricing wrong. And so we have to try to find a customer experience together that's better and a value exchange that makes sense for both parties. But I'm very hopeful that we'll get there over time. We continue to have a number of conversations.

And then I think you're going to have to look at as time goes on, which types of -- which shopping agents are consumers going to use. And it kind of reminds me in some ways of the early days of kind of all the search engines that were referring traffic to retailers. And it's still a relatively small portion of the overall traffic and sales. But of that fraction, you have to ask how many consumers are going to prefer using a horizontal agent where it's kind of a middle person between the retailer and the consumer versus wanting to use a great agent from that retailer that has all its shopping history and that has all the data right there and makes it easy if you're just spearfishing for something to shop for it right there or if you want to do discovery, you can do it there, and it's got the best data on shopping.

I think a lot of customers are ultimately going to choose to use a great shopping agent from that retailer. Because if you think about what consumers really want in retail in a retailer, they want really broad selection. They want low prices. They want really fast delivery. And then they want a retailer that they can trust and that takes care of them. And I think horizontal agents are pretty good at aggregating selection, but retailers are much better at doing all 4 of those items. And so I'm very optimistic that people will use our shopping agent. It's off to a great start. I also expect that we'll work with other third-party agents over time as we work on the issues I mentioned earlier.

The next question comes from the line of Brian Nowak with Morgan Stanley.

Andy, I want to ask you one about the global retail business this year. I know there's a lot of areas of investment in it that you're talking about to sort of make -- improve the service, make it more durable over the long term, et cetera. But I'm assuming there are also sources of efficiency you expect to see this year. So can you sort of help us understand both sides of the ledger on retail this year? Where are some of the areas where you see the potential for sources of efficiency and cost to serve savings? And then where should we be thinking about the areas of investment to sort of drive more durable growth, robotics, et cetera? How does that sort of break down?

Yes. So I would say on the side of continuing to invest to keep growing the retail business, the kind of core drivers of demand continue to be the same. We're going to work really hard to expand selection. And you've seen what we've done over the last several years. The expansion of selection has been broad. And you'll see it on both ends of the spectrum. We have a lot more of those luxury brands that have built presences in Amazon had success and found that we could manage their brand presentation in the right way, and they've been very happy. I mean you only have to look at L'Oreal as an example, too, of just how fast that business is growing and how happy our partners have been. And at the same time, we are working really hard to continue to expand the amount of everyday essentials that we offer our customers.

And the growth in Everyday Essentials in our business is really remarkable, as I mentioned in my opening comments. And one out of three units now that we move our Everyday Essentials. And what we find there is that the more the customers can rely on us for Everyday Essentials and the lower ASP items, they just choose to do more of their downstream shopping with us in every way. We're just more front of mind.

And so I think a big piece of why we have captured more and more of those everyday essentials, and you see it also in our grocery business with perishables, too, is just our speed of delivery improvements over the last three years has been really marked. I mean it's customers -- it's the one thing I get stopped on the street most often about, which is I just can't believe how quickly from when I order something, I get it to my door and how reliable you are.

I think along that speed of delivery piece, it's also quite interesting what's happening with quick commerce, and we have this offering called Amazon -- now that we've largely started outside the U.S. in India and the UAE and Mexico that gets thousands of items to customers within 30 minutes. And it really is -- it's quite interesting how quickly that is growing. And I think that it's just another one of those things like Everyday Essentials that when you're able to order more and more from Amazon, you just think of Amazon first if it's a great experience that we're offering for whatever you're looking for. But in our -- if you look in India, which is the place we've rolled out quick commerce the fastest, customers who try quick commerce are shopping with triple the frequency than they did before they tried us in quick commerce.

So, those are all areas, I think, are pretty excited that we're expanding. You'll see us continue to expand what we're doing on the perishable side, too, which we're quite excited about. And we are able to deliver perishables same day in thousands of cities around the world now. And the cities in which we have those perishables available, 9 of the 10 top items that are ordered in that geography are perishables. And so we're just having a lot of success with that, too. And people buy perishables from us after they buy perishables, they're shopping with us twice as frequently. So a lot of good things to like there.

And then on the efficiencies, we are -- I mean, we always have a very long list of these that we're working on, Brian. And it's true today as well. Like if you look -- even -- I mentioned -- I talked a lot about regionalization in our fulfillment network, particularly in the U.S. over the last couple of years. And I said we weren't done honing that, and that's true. It's just -- we don't talk about it every time. But if you look at what we've done there, we've extended the number of regions. It was 8. It's now 10. We've extended regionalization to what we do with our inbound delivery to be much more efficient in being able to get more items closer to customers more quickly.

We have made a lot of -- we're doing a lot of work, and we've made a huge amount of progress in being able to get more units into each box. And as we're able to get more units into each box, it obviously saves shipments and we drive better operating income when we do that. And we've made very significant progress there, but have a lot more planned. It's part of -- by the way, that improvement is part of what helps us do things like I was talking about earlier and adding to a delivery in near real time.

And then robotics, as you mentioned, is another big one for us. We have over 1 million robots today in our fulfillment network. They take care of all sorts of functions, but still a fraction of what I think we're going to be able to enable over time, which will allow our -- we'll always have a lot of people that we employ in our fulfillment network, but they'll leave to the robotics things that are more repetitive. So it's better productivity for the business, more safe for our teammates and there's real cost efficiencies in that as well. So a lot on both sides of the ledger as always.

And our final question comes from the line of Eric Sheridan with Goldman Sachs.

Maybe a few parts just on AWS. Can you speak to the current state of your revenue backlog as of Q4 and also discuss a little bit about what you see both for internal use cases and external client needs with respect to any imbalance between supply and demand around AI efforts and how you think about closing the gap on those as more capacity comes online through 2026?

That's a lot of parts. I'll start with the first one, which is on backlog, our backlog is $244 billion. That's up 40% year-over-year. I think it's up 22% quarter-over-quarter. We have -- and we have a lot of deals that are in the pipeline. There's just -- as I mentioned earlier, there is a lot of demand for AWS right now. in the AI space and also in the core AWS space.

Your second question was internal and external use cases. and then the impact around supply and demand. The vast majority of our -- the capital that we spend and the capacity that we have is consumed by external customers. We have -- Amazon has always been a very large AWS customer, a very helpful AWS customer because they're very demanding, and they use the services very expansively and stretch the limits as we launch things. So they've always been a very important big customer, but always a very small fraction of the total, and that's true today in AI as well as the overall AWS business.

Internally, we have all sorts of ways that we are using AI. We have over 1,000 AI applications that we've either deployed or in the process of building, and they range from our shopping assistant in Rufus that we were just talking about to Alexa+, which is a really large-scale generative AI application to applications in our fulfillment network that allow us to have more accurate forecasting predictions to how we do customer service and our customer service chatbot to how we are making it much easier for brands to create advertisements and to optimize all their campaigns across the full funnel of advertising options we have to -- in live sports, if you watch Thursday Night Football, you can see defensive alerts, which predict which player is going to blitz or pocket health. I mean we -- in every one of our businesses, you see a very broad use of AI to improve the customer experience. And in many cases, just to completely reinvent what was possible before. I mean it's pretty neat to use something like Lens where you may see something you want to buy, you can just take a picture of it in the app and it finds the item on the detail page you can buy in one click. It's kind of magic.

And externally, I would say it's kind of what I said earlier. You have AI labs consuming lots and lots of capacity. both for training as well as for the inference and the research across what they're doing with their different applications and models. We see enterprises all sorts of workloads, customer service automation, business process automation, fraud, completely reinventing their applications, agentic coding applications, legal applications. Suno is a really cool example of an AWS customer that's kind of reinvented how you can write music and build music. So really across the board.

And I just think on the supply and demand, what I would tell you is we're growing 24% year-over-year on a $142 billion annualized run rate business. So we're growing at really an unprecedented rate yet, I think every provider would tell you, including us that we could actually grow faster if we had all the supply that we could take. And so we are being incredibly scrappy around that.

If you look in the last 12 months, we added 3.9 gigawatts of power. Just for perspective, that's twice what we had in 2022 when we were an $80 billion annual run rate business. We expect to double it again by the end of '27. We added 1.2 gigawatts of power in Q4, just quarter-over-quarter. So it's -- so we are -- our team is being aggressive and scrappy and inventive in adding capacity as fast as we can. We'll add a lot more in '26 and '27 and '28 for that matter. And -- and we're very optimistic we can continue to grow in the ballpark of what we have.

Thanks for joining us on the call today and for your questions. A replay will be available on our Investor Relations website for at least three months. We appreciate your interest in Amazon, and we look forward to talking with you again next quarter.

Thank you for standing by. Good day, everyone, and welcome to the Amazon.com Third Quarter 2025 Financial Results Teleconference. [Operator Instructions] Today's call is being recorded.

And for opening remarks, I will be turning the call over to the Vice President of Investor Relations, Mr. Dave Fildes. Thank you, sir. Please go ahead.

Hello, and welcome to our Q3 2025 financial results conference call. Joining us today to answer your questions is Andy Jassy, our CEO; and Brian Olsavsky, our CFO. As you listen to today's conference call, we encourage you to have our press release in front of you, which includes our financial results as well as metrics and commentary on the quarter. Please note, unless otherwise stated. All comparisons in this call will be against our results for the comparable period of 2024. Our comments and responses to your questions reflect management's views as of today, October 30, 2025 only, and will include forward-looking statements.

Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings.

During this call, we may discuss certain non-GAAP financial measures. In our press release, slides accompanying this webcast and our filings with the SEC, each of which is posted on our IR website. You will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures.

Our guidance incorporates the order trends that we've seen to date and what we believe today to be appropriate assumptions. Our results are inherently unpredictable and may be materially affected by many factors, including fluctuations in foreign exchange rates, changes in global economic and geopolitical conditions, tariff and trade policies and customer demand and spending, including the impact of recessionary fears; inflation, interest rates, regional labor market constraints, world events, the rate of growth of the Internet, online commerce cloud services and new and emerging technologies and the various factors detailed in our filings with the SEC. Our guidance assumes, among other things, that we don't conclude any additional business acquisitions, restructurings or legal settlements. It's not possible to accurately predict demand for our goods and services, and therefore, our actual results could differ materially from our guidance.

And now I'll turn the call over to Andy.

Thanks, Dave. We saw strong growth across our business in Q3, and we're reporting $180.2 billion in revenue, up 12% year-over-year, excluding the impact from foreign exchange rates. Operating income was $17.4 billion, but would have been over $21 billion, if not for 2 special Q3 expenses, $2.5 billion for an FTC settlement and $1.8 billion for estimated severance costs. Trailing 12-month free cash flow was $14.8 billion.

I'll start with AWS. AWS is growing at a pace we haven't seen since 2022, reaccelerating to 20.2% year-over-year, our largest growth rate in 11 quarters. It's worth remembering that year-over-year percentage growth is a relative term. It's very different having 20% year-over-year growth on a $132 billion annualized run rate and to have a higher percentage growth rate on a meaningfully smaller annual revenue, which is the case with our competitors. Backlog grew to $200 billion by Q3 quarter end and doesn't include several unannounced new deals in October, which together or more than our total deal volume for all of Q3. AWS is gaining momentum. Customers want to be running their core and AI workloads in AWS given its stronger functionality, security and operational performance and the scale I see in front of us gives me significant confidence in what lies ahead. I'll share a little more detail on why.

It starts with AWS having much broader infrastructure functionality. Start-ups, enterprises and governments want to move their production workloads to the place that has the broadest and deepest array of capabilities. AWS has more services and deeper features within those services than anybody else and continues to innovate at a rapid clip. These are key building blocks for anything that customers want to create, and they're a big part of why Gartner has named AWS leader in its strategic cloud platform services Magic Quadrant for 15 consecutive years. We're bringing the same building block approach to AI. SageMaker makes it much simpler for companies to build and deploy their own foundation models. Bedrock gives customers leading selection of foundation models and superior price performance to deploy inference into their next-generation applications. A lot of the future value companies will get from AI will be in the form of agents. AWS is heavily investing in this area and well positioned to be a leader.

Companies will both create their own agents and use agents from other companies. For those building their own, it's been harder to build than it should be. It's why we launched strands to make it much easier to create agents from any foundation model that builders desire. For companies who successfully built agents, they've hesitated putting them into production because they lack secure scalable runtime services or memory or observability built specifically for agents. It's why we launched AgentCore, a set of infrastructure building blocks that allow builders to deploy secure, scalable agents. Ericsson used AgentCore to deliver AI agents across their workforce, Sony used it to build a agentic AI platform with enterprise-level security, observability and scalability. And Cohere Health is using AgentCore to deploy agents that will reduce medical review times by up to 30% to 40%. AgentCore's SDK has already been downloaded over 1 million times, and our builders are excited about it. It's an enabler.

Companies will also use other agents, and AWS continues to build many of the agents we believe builders will use in the future. For coding, we've recently opened up our agentic coding IDE called Kiro. More than 100,000 developers jumped into Kiro in just the first few days of preview and that number has more than doubled since. It's processed trillions of tokens thus far, weekly actives are growing fast, and developers love its unique spec and tool call and capabilities. For migration and transformation, we offer an agent called Transform. Year-to-date, customers have already used it to save 700,000 hours of manual effort. The equivalent of 335 developer years of work. For example, Thomson Reuters used it to transform 1.5 million lines of code per month, moving from Windows to open source alternatives and completing tasks or a times faster than with other migration tools.

Customers have also already used Transform to analyze nearly 1 billion lines of mainframe code as they move mainframe applications to the cloud. For business customers, we've recently launched QuickSleep to bring a consumer AI-like experience to work, making it easy to find insights, conduct deep research, automate tasks, visualize data and take actions. We've already seen users churn months long projects in today's get 80% plus time savings on complex tasks and realize 90% plus cost savings. And for contact centers, we offer Amazon Connect which creates a more personalized and efficient experience for contact center agents, managers and their customers. Connect has recently crested $1 billion annualized revenue run rate with 12 billion minutes of customer interactions being handled by AI in the last year and is being used by large enterprises like Capital One, Toyota, American Airlines and Ryanair. These are real practical results for customers, and there are many more examples like them.

Because of its advantaged capabilities, security, operational performance and customer focus, AWS continues to earn most of the big enterprise and government transformations to the cloud. As a result, AWS is where the preponderance of company's data and workloads reside and part of why most companies want to run AI and AWS. To enable customers to do so, we need to have the requisite capacity, and we've been focused on accelerating capacity the last several months, adding more than 3.8 gigawatts of power in the past 12 months, more than any other cloud provider. To put that into perspective, we're now double the power capacity that AWS was in 2022, and we're on track to double again by 2027. In the last quarter of this year alone, we expect to add at least another 1 gigawatt of power. This capacity consists of power, data center and chips, primarily our custom silicon, Trainium and NVIDIA.

We've recently brought Project Rainier Online, our massive AI compute cluster spanning multiple U.S. data centers and containing nearly 500,000 of our Trainium2 chips. Anthropic is using it now to build and deploy its industry-leading AI model, Claude, which we expect to be on more than 1 million Trainium2 chips by year-end. Trainium2 continues to see strong adoption, is fully subscribed is now a multibillion-dollar business that grew 150% quarter-over-quarter. Today, Trainium is being used by a small number of very large customers but we expect to accommodate more customers starting with Trainium3. We're building Bedrock to be the biggest inference engine in the world and in the long run, believe Bedrock could be as big a business for AWS as EC2, and the majority of token usage in Amazon Bedrock is already running on Trainium. We're also continuing to work closely with chip partners like NVIDIA, with whom we continue to order very significant amounts as well as with AMD and Intel. These are very important partners with whom we expect to keep growing our relationships over time.

You're going to see us continue to be very aggressive in investing in capacity because we see the demand. As fast as we're adding capacity right now, we're monetizing it. It's still quite early and represents an unusual opportunity for customers in AWS.

I'll now turn to stores. Where the team continues to deliver and innovate for customers across our key priorities, selection, low prices and convenience, particularly fast delivery, we're offering 14% more selection since last quarter from popular brands like The North Face and Charlotte Tilbury, and we've added hundreds of thousands of items from popular brands this year. Everyday Essentials continues to grow quickly, and year-to-date is growing nearly twice as fast as the rest of the business. We continue to make it easier for customers to order low-priced perishable groceries from Amazon, and customers in more than 1,000 cities and towns now can shop fresh groceries alongside millions of Amazon.com products with free same-day delivery. This is a game changer for customers who can now order milk alongside electronics, check out with one cart and have everything delivered to their doorstep within hours.

The team also invented a new add to delivery button that lets customers add items to previously scheduled orders and it's been used more than 80 million times since launch, and it's just launch. It's an example of one of those seemingly simple but powerful innovations that make customers' lives easier. We remain committed to staying sharp on price and meeting or beating prices of other major retailers. In July, we had our biggest Prime Day event ever, with customers saving billions of dollars across more than 35 categories. We continue to break records on speed. We're on track to deliver at our fastest speeds ever for Prime members globally once again this year, and we've started rolling out 3-hour delivery in select U.S. cities.

We're also continuing to invest in infrastructure to speed up rural deliveries and serve more customers in more communities. That includes committing over $4 billion to expand our rural delivery network across the U.S. These are small towns where people want fast delivery, but where other companies have been backing out and reducing service. In contrast, we've already increased the number of rural communities with access to our same-day and next-day delivery by 60%, reaching roughly half of the total communities we plan to expand to by the end of the year. The stores team is also innovating rapidly with AI. For example, Rufus, our AI-powered shopping assistant has had 250 million active customers this year with monthly users up 140% year-over-year, interactions up 210% year-over-year and customers using Rufus during a shopping trip being 60% more likely to complete a purchase. Rufus is on track to deliver over $10 billion in incremental annualized sales.

Here are the highlights. Our generative AI-powered audio feature that combines product summaries and reviews to make shopping easier has expanded from hundreds of products at launch to millions of products and millions of customers have used it streaming almost 3 million minutes. In Amazon Lens, an AI-powered visual search tool that lets customers find products with their phones camera, a screenshot or a bar code, now includes Lens Live, which instantly scans products and shows real-time matches in a swipeable carousel. Tens and millions of customers are using Amazon Lens each month.

Moving on to Amazon ads. We're pleased with the continued strong growth, generating $17.6 billion of revenue in the quarter and growing 22% year-over-year. We see strength across our broad portfolio of full photo advertising offerings that helps advertisers reach an average ad-supported audience of more than $300 million in the U.S. alone. We also continue to be excited about our demand side platform, Amazon DSP, which lets advertisers plan, activate and measure full funnel investments. Last quarter, I mentioned our partnership with Roku and we've built on that with a partnership with Netflix, providing advertisers using Amazon DSP with direct access to Netflix's premium ad inventory. We announced integrations with Spotify and SiriusXM. With Spotify, we provide advertisers with direct programmatic access to a global audience of more than 400 million monthly ad-supported listeners. And with SiriusXM, brands can reach 160 million monthly digital listeners across services like Pandora and SoundCloud and we're excited about the advertising opportunity around prime video live sports. Live sports got a lot of interest from advertisers in upfront negotiations for 2025, '26, and we exceeded our own expectations for upfront commitments with significant growth across the board.

Finally, we're continuing to invade for advertisers with AI. For example, in September, we announced an agentic AI tool and creative studio that plans and executes the entire creative process in a matter of hours instead of weeks. We're also inventing and seeing strong momentum in several other areas, and I'll mention just a few. In Prime Video live sports, NBA on Prime tipped off last week and our opening night doubleheader averaged 1.25 million viewers in the U.S., a double-digit increase over last season on cable. You'll see us bring the same constant innovation here that we brought to our NFL broadcast. We're adding golf with The Masters in 2026 and new skins competition with the PGA Tour on Black Friday this year. And we've added Peacock and FOX One to Prime Videos add-on subscription offering of over 100 channels in the U.S.

We continue to be energized by the response to Alexa+ compared to what we call the classic Alexa experience, Alexa+ customers are talking to Alexa 2x more. Those interactions are much longer, and they're covering a broader range of topics. So using Alexa+ and Fire TV at 2.5x the rate of classic using natural conversation to discover audio content 4x more, engaging with photos 4x more and customers are completing 4x more shopping conversations that end in a purchase. We've expanded the number of project hyper satellites and space to more than 150 and delivered over 1 gigabit per second speeds and test with our enterprise-grade customer terminal, the first commercial phased array we know of to clear that threshold. Finally, Zoox robotaxis are available to riders in Las Vegas, and we've announced Washington, D.C. as the eighth testing location. We're excited for these to continue rolling out to more riders. Q4 is one of our busiest and most energizing times of the year, and we're excited about the continued demand for AWS. The innovations will announce the reinvent in December, the positive customer response to our AI-powered experiences, all the guests will be delivering throughout the holiday season and a lot more.

Thanks in advance to our teammates around the world who are gearing up to deliver for customers once again. With that, I'll turn it over to Brian for a financial update.

Thanks, Andy. Starting with our top line financial results. Worldwide revenue was $180.2 billion, a 12% increase year-over-year, excluding a 90 basis point favorable impact of foreign exchange. In Q3, we reported worldwide operating income of $17.4 billion. This operating income includes 2 special charges, which reduced operating income by $4.3 billion. The first charge of $2.5 billion is related to a legal settlement with the Federal Trade Commission, which impacts the North America segment and is recorded in the other operating expense line.

The second charge of $1.8 billion relates to severance costs for roll eliminations and impacts all 3 of our segments. The severance charge is recorded primarily in the technology and infrastructure, sales and marketing and general and administrative expense line items. Excluding these 2 charges, worldwide operating income would have been $21.7 billion or $1.2 billion above the high end of our guidance range.

Moving to our segment results. We remain encouraged by the innovation our teams are delivering for customers across all 3 segments. In the North America segment, third quarter revenue was $106.3 billion, an increase of 11% year-over-year. International segment revenue was $40.9 billion, an increase of 10% year-over-year, excluding the impact of foreign exchange. Worldwide paid units grew 11% year-over-year. We continue to prioritize the inputs that matter most to our customers. In the third quarter, our sharp pricing, broad selection and fast delivery speeds continue to resonate with customers. Customers appreciate the ability to quickly receive items essential for their daily needs, including perishable groceries and have them delivered in the same day. Our millions of global third-party sellers continue to be important contributors to our vast selection, which helps customers find the items they need at competitive prices.

We're committed to building innovative services and features for our sellers, including our ongoing advancements in generative AI. Today, more than 1.3 million sellers have used our generative AI capabilities to more quickly launch high-quality listings. Better listings translate into better traction with customers. And in Q3, worldwide third-party seller unit mix was 62%, up 200 basis points from Q3 of last year. Shifting to profitability. North America segment operating income was $4.8 billion, with an operating margin of 4.5%. Excluding the $2.5 billion charge related to the legal settlement with the FTC, North America segment operating income would have been $7.3 billion with an operating margin of 6.9%. North America segment operating margin also includes a portion of the severance charge. International segment operating income was $1.2 billion, with an operating margin of 2.9%. Excluding the impact of the severance charge International segment operating margins expanded year-over-year.

Globally, our progress on key inputs is delivering a better customer experience while driving a more efficient cost structure. For example, we're making notable strides in improving inventory placement to speed up delivery to customers. And as a result, for the third year in a row, we are on track to deliver our fastest speeds ever for Prime members in 2025. We continue to tune and improve our fulfillment operations and our regionalized network is operating at scale. We see many benefits of our inbound process improvements, including a reduction of U.S. inbound lead time by nearly 4 days compared to last year. This allows us to be more efficient with our inventory purchasing, which benefits working capital. We're also placing inventory more strategically throughout the network. And by leveraging our existing infrastructure, we're now offering U.S. customers the ability to order perishable groceries and receive them the same day and as little as 5 hours.

We're seeing positive early results since launching in January, when customers start shopping groceries on Amazon, they are visiting the site more often and returning twice as often as nonperishable shoppers. Looking ahead, we see further opportunity to improve our activity in our global fulfillment and transportation network. We continue to improve inventory placement to drive down distance travel and touches for package. We will also build on the gains from our regionalized network through algorithmic improvements as well as launching robotics and automation. Operating margin may fluctuate quarter-to-quarter, we have a delivered approach to achieve sustained progress over the long term.

Shifting to advertising. Advertising revenue was $17.7 billion and growth accelerated for the third consecutive quarter. We continue to see strong growth on an increasingly large base, as our full funnel advertising approach of connecting brands with customers is resonating.

Moving next to our AWS segment. Revenue was $33 billion, up 20.2% year-over-year. This is an acceleration of 270 basis points compared to last quarter, driven by strong growth across both our AI and core services and more capacity, which has come online to support customer demand. AWS revenue increased $2.1 billion quarter-over-quarter and now has an annualized revenue run rate of $132 billion. AWS operating income was $11.4 billion, and reflects our continued growth, coupled with our focus on driving efficiencies across the business. We are expanding our data center footprint, largely to accommodate Gen AI. And to the extent those assets were placed into service related to depreciation does impact our margins. As we've long said, we expect AWS operating margins to fluctuate over time, driven in part by the level of investments we're making at any point in time.

Now turning to our cash CapEx, which was $34.2 billion in Q3. We've now spent $89.9 billion so far this year. This primarily relates to AWS as we invest to support demand for our AI and core services and in custom silicon, like Trainium as well as tech infrastructure to support our North America and international segments. We'll continue to make significant investments, especially in AI, as we believe it to be a massive opportunity with the potential for strong returns on invested capital over the long term. Additionally, we continue to invest in our fulfillment and transportation network to support the growth of the business, improve delivery speeds and lower our cost to serve. These investments will support growth for many years to come. Looking ahead, we expect our full year cash CapEx to be approximately $125 billion in 2025, and we expect that amount will increase in 2026.

I'll finish up my remarks with net income. While we primarily focus our comments on operating income, our third quarter net income of $21.2 billion includes a pretax gain of $9.5 billion related to our investment in Anthropic. This investment activity is not related to Amazon's ongoing operations and is included in nonoperating income. We're encouraged by the start of the peak season and we are ready to serve customers in the coming months. I want to thank our teams across Amazon for their hard work as we get ready to delight customers during the holiday season. Our commitment to elevating the customer experience is the only reliable way to drive sustainable value for our shareholders.

With that, let's move on to your questions.

[Operator Instructions] And our first question comes from the line of Justin Post with Bank of America.

I'll ask on AWS. Can you just kind of go through how you're feeling about your capacity levels and how capacity constrained you are right now? And then in your prepared remarks, you mentioned Trainium3 demand and maybe broadening out your customer base. Can you talk about the demand you're seeing outside of your major customers for Trainium?

Yes. On the capacity side, we brought in quite a bit of capacity, as I mentioned in my opening comments, 3.8 gigawatts of capacity in the last year with another gigawatt plus coming in the fourth quarter and we expect to double our overall capacity by the end of 2027. So we're bringing in quite a bit of capacity today, overall in the industry, maybe the bottleneck is power. I think at some point, it may move to chips, but we're bringing in quite a bit of capacity. And as fast as we're bringing in right now, we are monetizing it.

And then on the Trainium demand, outside of our major customers. So first of all, as I mentioned on Trainium2, it's really doing well. It's fully subscribed on Trainium2. We have -- it's a multibillion-dollar business at this point. It grew 150% quarter-over-quarter in revenue. And you see really big projects at scale now, like our Project Rainier that we're doing with Anthropic, where they're running their next version of -- they're training the next version of Claude on top of Trainium2 on 500,000 Trainium2 chips going to 1 million Trainium2 chips by the end of the year. As I mentioned, we have -- today, with Trainium2, we have a small number of very large customers on it. But because Trainium is 30% to 40% more price performance than other options out there, and because as customers, as they start to contemplate broader scale of their production workloads, moving to being AI-focused and using inference, they badly care about price performance. And so we have a lot of demand for Trainium. Trainium3 should preview at the end of this year with much fuller volumes coming in the beginning of '26, we have a lot of customers, both very large, and I'll call it, medium-sized who're quite interested in Trainium3.

And the next question comes from the line of Brian Nowak with Morgan Stanley.

Congrats on the quarter, guys. So maybe 2. One, Andy, sort of a philosophical chip question. There's a lot of questions in the market about Trainium and sort of its positioning versus other third-party chips. So how do you think about the key hurdles of Trainium3 need to overcome to really make Trainium adoption broader, to your point on the last question and continue to drive Trainium as opposed to satisfying what could be broader demand with third-party chips in the near term?

Yes. Well, first of all, we're always going to have multiple chip options for our customers. It's been true in every major technology building block or component that we've had in AWS. Really in the history of AWS, it's never just one player that over a long period of time has the entire market segment and then can satisfy everybody's needs on every dimension. And so we have a very deep relationship with NVIDIA. We have for a very long time. And we will for as long as I can foresee the future. We buy a lot of NVIDIA. We are not constrained in any way in buying NVIDIA, and I expect that we'll continue to buy more NVIDIA both next year and in the future.

But we're different from most technology companies in that we have our own very strong chip team, and this is our Annapurna team. And you saw it first on the CPU side with what we built with Graviton which is about 40% better price performance than the other x86 processors, and you're seeing it again on the custom silicon on the AI side with Trainium, which is about the same amount of price performance benefit for customers relative to other GPU options. And our customers to be able to use AI as expansively as they want. And remember, it's still relatively early days at this point. They're going to need better price performance and they care about it deeply. And so I mentioned earlier the momentum that Trainium2 has. And I think that for us, as we think about Trainium3, I expect Trainium3 will be about 40% better than Trainium2 and Trainium2 is already very advantaged on price performance.

So we have to, of course, deliver the chip. We have to deliver it in volumes and deliver it quickly. And we have to continue to work on the software ecosystem, which gets better all the time. And as we have more proof points like we have with Project Rainier with what Anthropic's doing on Trainium2, it builds increasing credibility for Trainium. And I think customers are very bullish about it. I'm bullish about it as well.

And our next question comes from the line of Doug Anmuth with JPMorgan.

I'll stick with basically the same topic, Andy. But can you just talk a little bit about the architecture of Project Rainier and how it's differentiated and what that means for customers and for AWS? And do you expect Rainier to expand beyond Anthropic? And how do you replicate Rainier with Trainium3 chips?

Yes. I think what is compelling for entropic around Project Rainier is really is the Trainium2 chip, which we built a very -- first of all, we built a very large cluster that they can use in a very expansive way. And it's not simple to be able to build a cluster that has 500,000 plus chips going to 1 million. That's an infrastructure feet that's hard to do at scale. And so some piece of it is the infrastructure capabilities that we've built over a long period of time in AWS that is unusual in the industry. But it's just also the performance of the chip and the price performance, both of which matter.

And I think that Project Rainier is something that is specific for anthropic, but we have a lot of other customers who are interested in employing large clusters of Trainium chips that we're going to hopefully give them a chance to do so with Trainium3.

The next question comes from the line of Mark Mahaney with Evercore ISI.

I want to ask about 2 topics, groceries and then how to think about head count in the future. And on groceries, I want to -- the perishables, I think last quarter, you talked about 70% or something of users had never purchased from perishables from Amazon before. Just talk about whether you -- I think you used the term, Game Changer, before. Does this mean that maybe we don't -- you no longer need to Amazon Fresh stores. You always had this DVD delivery van density advantage. And have you kind of reached a point you think of scale and speed that you really can change people habit and really have them consider Amazon as one of their first grocery options? Do you really feel like you're at that point?

And then secondly, just on the head count, some of the recent news. Just talk to us about how you think about head count going forward? Are you seeing -- is the level of efficiencies that you're getting from AI such that you can keep head count relatively flattish for the foreseeable future? Just talk about the pros and cons or the wins and losses in terms of that head count going forward?

Yes. So I'll start with grocery, Mark. We have a very large grocery business. If you look at our entire grocery business, if I don't even count Whole Foods Market and Fresh, in the last 12 months to over $100 billion of gross merchandising sales, which would make us a top 3 grocery in the U.S. A good chunk of it is a lot of the items that you'd find in the middle aisle so consumables and canned goods and pet food and health and beauty, very significant and continues to grow at a very good clip.

But then we also have Whole Foods Market, which is the pioneer in organic foods, which is also growing at a faster clip than most grocery companies with an attractive trajectory on profitability, and we'll expand our Whole Foods physical presence over the coming years here. And I'm also very excited about this new concept, daily shop that we have, which is a smaller version of Whole Foods in urban settings, which we have 3 that we've launched that are off to very good starts that you should expect to see more of as well.

And we have always been -- as you referenced, we've talked a lot about having a larger mass physical presence. And we continue to experiment with various formats. But the one that we are most excited about is what you referenced, which is the ability to provide perishable groceries with same-day deliveries. And if you think about how many of our customers are buying from us multiple times a week and who are buying things like shampoo or detergent or paper cups or water, where the ability to add milk and eggs and yogurt and other perishables to their order and have it live in the same shop in cart and then show up a few hours later, is very compelling. And we started with a few markets about a year ago, and we were really taken aback at the adoption, not just the number of people that started buying perishables from us very quickly but how often they came back downstream to buy perishables and groceries from us in the future. And so we've now expanded that to 1,000 cities around the U.S. and will be in 2,300 by the end of the year. And it's really changing the trajectory and the size of our grocery business.

And I also believe that this many years tradition of the weekly stock up grocery stock up is changing. And I think we're a big part of that. And I think there's a lot of potential there for the grocery side. It doesn't mean that we won't continue to experiment with other physical formats, but we're on to something very significant with what we're doing with perish both from our same-day facilities.

And then on your head count question, what I would tell you is the announcement that we made a few days ago was not really financially driven and it's not even really AI-driven, not right now, at least. It really -- its culture. And if you grow as fast as we did for several years, the size of businesses, the number of people, the number of locations, the types of businesses you're in, you end up with a lot more people than what you had before, and you end up with a lot more layers. And when that happens, sometimes without realizing that you can weaken the ownership of the people that you have who are doing the actual work and who own most of the 2-way door decisions, the ones that should be made quickly and right at the front line, and it can lead to slowing you down. And as a leadership team, we are committed to operating like the world's largest start-up. And that means removing layers. It means increasing the amount of ownership that people have, and it means inventing and moving quickly.

And I don't know if there's ever been a time in the history of Amazon or maybe business in general with the technology transformation happening right now, where it's important to be lean, it's important to be flat, and it's important to move fast, and that's what we're going to do.

And the next question comes from the line of Eric Sheridan with Goldman Sachs.

Wanted to know, Andy, if you could reflect on the opportunity that's continuing to present itself in terms of rolling out more robotics and automation and the broader theme of physical AI across your operations? And how should we be thinking about that as a driver of potential efficiencies, but also as a driver of the ability to possibly reinvest back in the business over the long term?

Robotics is a very substantial area of investment for us. We have over 1 million robots in our fulfillment network at this point. And I would say that while that's significant, we have a lot of invention in flight. So I expect that we'll have more over a period of time.

Robotics are very important for us and for our customers and for our teammates because they improve safety, they boost productivity, they increased speed, and they let our human teammates focused on problem solving and what they do best. And we expect that our people remain at the heart in the center of our fulfillment network as they have from when we first started working the robotics. And we expect that over time, we will have a fulfillment network where robots and humans complement each other and work together. But I think you're going to continue to see us advance invest very significantly in robotics. It's going to help on the safety, the productivity, the speed and ultimately some of the cost pieces, which will allow us to continue to improve the customer experience.

And the next question comes from the line of John Blackledge with TD Cowen.

How does Amazon think about agentic commerce going forward? And how do you think Amazon will serve customers using agents to purchase goods on Amazon in the future?

I'm very excited about -- and as a business, we're very excited about in the long term the prospect of agentic commerce. And it has a chance to be good for customers has a chance to be really good for e-commerce. And I think if you're -- if you know what you want to buy, there are a few experiences that are better than coming to Amazon. But if you don't know what you want, it's a physical store with a physical salesperson still has some advantages. Obviously, lots of people do it on Amazon all the time. But you very often want to ask questions and help get help narrowing what you're going to look for. And as you keep asking new questions, having a whole bunch of different options presented to you. And I think AI and agentic commerce are going to change the experience online where that experience where you're narrowing what you want when you don't know is going to get better online than it even is in physical environments.

Now we obviously have our own efforts here in agentic commerce. We have Rufus, which I talked about in my opening comments, which is continuing to get better and better and used more broadly. And we have features like Buy for Me where we will surface on Amazon, even items that we don't stock that other merchants have. And then if customers want us to go and buy it for them on those merchants websites, we will do that. And both of those have been successful for us. But we're also having conversations with and expect over time to partner with third-party agents. And I think that it reminds me in some ways of the beginning of search engines many years ago being sources of discovery for commerce. And you had to kind of figure out the right way to work together.

And today, search engines are a very small part of our referral traffic and third-party agents are a very small subset of that. But I do think that we will find ways to partner. We have to find a way, though, that makes the customer experience good. Right now, I would say the customer experience is not -- there's no personalization. There's no shopping history. The delivery estimates are frequently wrong. The prices are often wrong. So we've got to find a way to make the customer experience better and have the right exchange value. But I do think that the exciting part of this and the promise is that AI and agentic commerce solutions are going to expand the amount of shopping that happens online. And I think that's really good for customers, and I think it's really good for Amazon because at the end of the day, you're going to buy from the outfit that allows you to have the broadest selection, great value and continues to deliver for you very quickly and reliably. And I think that bodes well for us.

And our final question comes from the line of Colin Sebastian with Baird.

I guess first on AWS, following up there. How much of this acceleration is driven by core infrastructure versus AI workload monetization? And I think part of it is trying to understand how important newer services like AgentCore are becoming and bringing enterprises to AWS to build agents? And then I guess, secondly, regarding the acceleration in advertising, if you could potentially disaggregate the core advertising contribution versus DSP and Prime video. That would be helpful as well.

I'll start on the AWS side, we are seeing -- we're really pleased with the results from this quarter, 20% year-over-year on a annualized run rate of $132 billion is unusual. And we have momentum. You can see it. And we see the growth in both our AI area, where we see it in inference. We see it in training. We see it in the use of our Trainium custom silicon. Bedrock continues to grow really quickly. SageMaker continues to grow quickly. And I think that the number of companies who are working on building agents is very significant. I do believe that a lot of the value that companies will realize over time and AI will come from agents.

And I think that building agents today is still harder than it should be. You need tools to make it easier, which is why we built strands, which is an open source capability that lets people build agents from any model that they can imagine. But even more so, when you talk to enterprises or companies that care a lot about security and scale. They're starting to build agents, and they don't really feel like they've got -- they've had building blocks that allow them to have the type of secure scalable agents that they need to bet their businesses and their customer experience and their data. And that's why -- that was really the inspiration behind AgentCore was to build another set of primitive building blocks like we built in the early days of AWS, where it was compute and storage and database. We defined a set of building blocks that you needed to be able to deploy agents securely and scalably that we provide in AgentCore. And then when we talk to our customers, it really resonates. There is not anything else like it, it's changing their time frame and their receptivity to building agents, and it's very compelling for them.

So I do think the combination of what we're doing to enable agents to be built and run securely and scalably as well as some of the agents that we're building ourselves that our customers are excited about are compelling for them. And I think the other place we see a lot of growth in AWS also is just the number of enterprises who are -- who have gotten back to moving from on-premises infrastructure to the cloud. And we continue to earn the lion's share of those transformations. And I look at the momentum we have right now, and I believe that we can continue to grow at a clip like this for a while.

I think on the advertising side, that is also an area where I think collectively, we feel very pleased about the progress. Every single one of our advertising offerings this quarter grew in a meaningful way. I think there's a few things going on for us. We have what I think of as a pretty unusual full funnel offering. And if you look at the top of the funnel, which typically tends to be awareness building and broad scale to be able to use our own Prime Video and our live sports capabilities as well as going all the way down to the bottom of the funnel at point of sale being able to use sponsored products, that's -- most people don't have a full funnel offering as robust as that. And then when you layer on top of it, the combination of the audience curation and development we can do, along with the advantage measurement, it just all leads to a return on advertising spend is very unusual.

And I think there are multiple places where we can expect to continue to grow. One is in our stores business. I still think if you look at the worldwide market segment share of retail, still 80% to 85% of it lives in physical stores. And that equation is going to flip over time. And I think AI is going to only accelerate that. So I think we have an opportunity -- a significant opportunity still in our existing stores. And then I think video, we've only been at this for a little bit of time, but it's already a very large amount of advertising revenue, and we're still relatively early stage. I think that will continue to be a big area of growth. And then as you referenced, the amount -- their demand-side platform or Amazon DSP, that is growing really quickly as well. And some of it had to do with the fact that we had some features. We always had a number of the core components people wanted around some of our properties, the measurement capabilities, Amazon Marketing Cloud, but we lack some features for a while as we were building out our DSP that customers told us mattered and the team over the last 20 months have closed those gaps in a very significant way so that now people feel like our DSP is fully featured.

And then you look at some of the partnerships that we've done, the Roku partnership gives us the largest connected TV footprint in the U.S. And you layer on top of that, what we've recently done in providing our DSP customers, the opportunity to integrate with the ad inventory in Netflix and Spotify and SiriusXM, it's powerful. And so we are growing very quickly on the demand side platform. So very optimistic about what we're doing there. We've continued work to do, obviously, but I don't think we're close to being able to grow there.

Thanks for joining us on the call today and for your questions. A replay will be available on our Investor Relations website for at least 3 months. We appreciate your interest in Amazon and look forward to speaking with you again next quarter.

Thank you for standing by. Good day, everyone, and welcome to the Amazon.com Second Quarter 2025 Financial Results Teleconference.

[Operator Instructions]

Today's call is being recorded. And for opening remarks, I will be turning the call over to the Vice President of Investor Relations, Mr. Dave Fildes. Thank you, sir. Please go ahead.

Hello, and welcome to our Q2 2025 financial results conference call. Joining us today to answer your questions is Andy Jassy, our CEO; and Brian Olsavsky, our CFO. As you listen to today's conference call, we encourage you to have our press release in front of you, which includes our financial results as well as metrics and commentary on the quarter. Please note, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2024. Our comments and responses to your questions reflect management's views as of today, July 31, 2025, only and will include forward-looking statements.

Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and our filings with the SEC, including our most recent annual report on Form 10-K and subsequent filings. During this call, we may discuss certain non-GAAP financial measures. In our press release, slides accompanying this webcast and our filings with the SEC, each of which is posted on our IR website. You will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures.

Our guidance incorporates the order trends that we've seen to date and what we believe today to be appropriate assumptions. Our results are inherently unpredictable and may be materially affected by many factors, including fluctuations in foreign exchange rates, changes in global economic and geopolitical conditions, tariff and trade policies and customer demand and spending, including the impact of recessionary fears; inflation, interest rates, regional labor market constraints, world events, the rate of growth of the Internet, online commerce cloud services and new and emerging technologies and the various factors detailed in our filings with the SEC. Our guidance assumes, among other things, that we don't conclude any additional business acquisitions, restructurings or legal settlements. It's not possible to accurately predict demand for our goods and services, and therefore, our actual results could differ materially from our guidance.

And now I'll turn the call over to Andy.

Thanks, Dave. Today, we're reporting $167.7 billion in revenue, up 12% year-over-year, excluding the impact from foreign exchange rates. Operating income was $19.2 billion, up 31% year-over-year and trailing 12-month free cash flow was $18.2 billion. We saw good progress across our various customer experiences and businesses this past quarter.

Starting with stores. We feel good about both the inputs and outputs of the business. At Amazon, we think of our business in terms of inputs and outputs. Outputs or metrics like revenue are operating margin. But of course, you can't manage at the output level, it's the inputs that drive the outputs. So we spent virtually all of our time internally talking about and goaling against inputs. The inputs that matter most to customers in our stores business are selection, low prices and speed of delivery. We've taken another step forward in selection these past few months headlined by the much requested return of Nike's products to Amazon's retail store. We've added premium brands like Away, Aveta, Mark Jacobs fragrances and brands from Saks and Amazon like Dolce and Gabana, Entra, Stella McCartney, Rosettaeti and the Pree. And we started expanding our very successful Perishables Pilot, where we offer customers perishables as a point of purchase when they're ordering other items that will be delivered same day from our same-day fulfillment nodes.

We're seeing strong customer adoption as 75% of customers who viewed as service this year are first-time shoppers for perishables on Amazon, with 20% of customers who use the service returning multiple times within their first month. Our prices continue to be low and sharp for customers. It's one of the reasons our everyday Essentials growth outpaced the rest of the business globally and representing one out of every 3 units sold. It's also why well-known research firm [indiscernible] has concluded for 8 years in a row that Amazon has the lowest prices of any U.S. retailer, but perhaps the clearest outputs are the rate at which our stores business grew this past quarter and the success we saw in our recent Prime Day event.

This year's Prime Day was our biggest ever with record sales, number of items sold and number of prime sign-ups in the 3 weeks leading up to the Prime Day. Customers save billions of dollars in independent sellers, most of which are small and medium-sized businesses saw their best sales performance of any Prime Day event yet. There continues to be a lot of noise about the impact that tariffs will have on retail prices and consumption. Much of it thus far has been [indiscernible] and misreported. As we said before, it's impossible to know what will happen. Where will tariffs finally settle especially China? What happens when we deplete the inventory we forward bought or that our selling partners who were deployed in advance of the tariffs going into effect.

If costs end up being higher, who will absorb them, but what we can share is what we've seen thus far, which is that through the first half of the year, we haven't yet seen diminishing demand nor price is meaningfully appreciating. We also have such diversity of sellers in our marketplace over 2 million sellers in total with different strategies of whether to pass on higher cost to consumers, the customers are advantaged shopping at Amazon because they're more likely to find lower prices on the items they care about. Further improving delivery speed remains a key focus, and we continue to make progress. We've previously shared how we rearchitect our U.S. inbound network into a regional structure, allowing us to place inventory and ship from locations closer to customers, improving speed and low run costs.

That work is delivering tangible results. In Q2, we increased the share of orders moving through direct lanes where packages go straight from fulfillment to delivery without extra stops by over 40% year-over-year. We've also reduced the average distance packages traveled by 12% and lowered handling touches per unit by nearly 15%. We've made progress on order consolidation with more products positioned locally, we're able to pack more items into each box and send fewer packages per order. That has helped drive higher units per box and improved overall cost to serve. Taken together, these improvements are making the network faster and structurally more efficient. We've also set another global speed record in Q2 delivering to prime members at our fastest speeds ever. In the U.S., we delivered 30% more items same day or next day than during the same period last year. Items customers used to pick up locally and nearby physical stores are now arriving at their door often within hours. And we're working to further improve delivery speeds no matter where customers live, we've recently announced plans to expand our same-day and next-day delivery to tens of millions of U.S. customers and more than 4,000 smaller cities, towns and rural communities by the end of the year.

Today, it's already available in more than 1,000 of these communities across the U.S. The early response from customers in these areas have been very positive. They're shopping more frequently and purchasing household essentials and meaningfully higher rates. Automation and robotics are also important contributors to improving cost efficiencies and driving better customer experiences over time. We deployed our 1 millionth robot across our global fulfillment network and unveiled innovations in our last-mile innovation center, such as automated package sorting and a transformative technology that brings packages directly to employees in an ergonomic height. We rolled out Deep [indiscernible], our AI improves robot travel efficiency by 10%. At our scale, it's a big deal. Deep fleet acts like a traffic management system to coordinate robots' movements to find optimal paths and reduce bottlenecks. For customers, it means faster delivery times and lower costs for our team members, our robots handle more of the physically demanding tasks, making our operations network even safer.

This combination of robotics and generative AI is just getting started. And while we've made significant progress, it's still early with respect to what will roll out in the next few years. Moving on to Amazon ads. We're pleased with the strong growth, generating $15.7 billion of revenue in the quarter, growing 22% year-over-year. We continue to see strength across our broad portfolio of full funnel advertising offerings that in the U.S. alone help advertisers reach an average ad-supported audience of more than $300 million across our own properties. These are properties like our retail marketplace, Prime Video, Twitch and Fire TV in live sports, such as NFL, NASCAR and the NBA as well as third-party websites and apps. Another area we're excited about is our demand side platform, or Amazon DSP. Our DSP enables advertisers to plan, activate and measure full funnel investments. Our trillions of proprietary browsing, shopping and streaming signals paired with extensive supply side relationships and our secure clean rooms provide advertisers the ability to optimize advertising, deliver greater precision and drive efficient and effective advertising outcomes.

And in June, we announced a momentous partnership with Roku, giving advertisers access to 80 million connected TV households, the largest authenticated connected TV footprint in the U.S. exclusively through Amazon DSP is a giant leap forward for advertisers bringing best-in-class planning, audience precision and performance to TV advertising.

We also announced an integration between Disney's real-time ad exchange and Amazon DSP. This collaboration allows advertisers to gain direct access to Disney's premium inventory across platforms like Disney+, ESPN and Hulu while allowing them to leverage insights from both companies. When advertisers work with Amazon, they're not just buying ad space they're benefiting from exceptional programming, innovative technology and unrivaled signals, measurement and audience development that provide strong relevancy for consumers and return on investment for brands.

Moving on to AWS. In Q2, AWS grew 17.5% year-over-year and now has over $123 billion annualized revenue run rate. We continue to help organizations of all sizes accelerate their transition to the cloud, signing new agreements with companies, including PepsiCo, Airbnb, Peloton, NASDAQ, London Stock Exchange, Nissan Motor, GitLab, SAP, Warner Bros. Discovery, 12 Labs, FICO, Iberia Airlines, SK Telecom and NatWest. In the rapidly evolving world of generative AI, AWS continues to build a large, fast-growing triple-digit year-over-year percentage multibillion-dollar business with more demand than we have supplied for at the moment.

A few points to make. First, on the hardware side, our custom AI chip, Trainium2 is landing capacity in larger quantities and has impressively emerged as the backbone for Anthropic's newest generation Claude models and many of our most essential offerings like Amazon Bedrock. We've also launched Amazon EC2 instances powered by NVIDIA Grace Blackwell Super chips, AWS' most powerful NVIDIA GPU accelerated instance.

Second, in Bedrock, we've recently added Anthropic's Claude 4 and is the fastest-growing model ever in Bedrock. We've also continued to see strong adoption of Amazon Nova, our own Frontier model, and it's now the second most popular foundation model in Bedrock. New features in Nova allow customers to customize their Nova models in ways they can't and other foundation models, allowing organizations to infuse these models with their unique expertise while optimizing for cost and speed. As people have become excited about building agents, they're realizing they lack the tools to build them. In May, we released [indiscernible], an open-source way to more easily build agents has taken off with a wide range of customers with already 2,500 stars on GitHub and over 300,000 downloads on [indiscernible] PI. Customers are also struggling with deploying agents into production in a secure and scalable way. It's holding up enterprises scaling agents. To help solve that problem, Bedrock just released Agent Core. Agent Core is a set of building blocks that gives customers the industry's first secure serverless run time to provide both synchronous and asynchronous execution, aging identity and boundaries, a memory service a gateway to translate services to MCP compatible interfaces, built-in code execution and web browser tools and an observability service. Customers are excited about Agent Core, and it frees them up to start deploying agents more expansively.

Third, you're starting to see AWS release more powerful applications at the top layer of the AI stack. AWS transform as an AWS agent that dramatically reduces mainframe modernization time lines from years to months completes VMware TC2 conversions up to 80x faster, it makes it simple to move from .NET windows to .NET Linux implementations, reducing licensing costs for .NET applications by up to 40%. We've also just released Kiro, our new Agentic integrated development environment coding agent. There's a lot of buzz around Kiro with several hundred thousand developers using and requesting access in the first couple of weeks, 100,000 used in the first 5 days of the preview.

What struck a cord for developers is that Kiro allows them to do Vibe coding where developers use natural language to chat with a coding agent to build code. But unlike other coding agents, where developers don't really have any structure to build on top of, Kiro allows developers to use natural language to build spec and then automatically updates that spec as they continue to vibe code or interact with Kiro. This makes it much easier to go from prototyping to production. Customers also like Curo's event-driven hooks that act like an experienced developer catching things developers might miss. When developers save a React component, hooks update that test file. When they modify API endpoints, Hooks refresh readme files. When they're ready to commit security hook scan for leak credentials. It's still very early for Kiro, but it seems clear we're on to something customers love and Kiro has a chance to transform how developers build software.

I say this frequently, but remember that 85% to 90% of worldwide IT spend is still on-premises versus in the cloud. In the next 10 to 15 years, that equation is going to flip, further accelerated by company's excitement for leveraging AI. So AWS has significantly broader functionality, stronger security and operational performance a much deeper experience helping enterprises modernize their infrastructure bodes well for the AWS business moving forward. We're also seeing momentum in a number of our other areas across Amazon.

I'll mention just a few. We're excited about our progress with Alexa Plus, our next-generation assistant powered by generative AI. We've been rolling out early access to U.S. customers to start millions of customers have access now. We're seeing very positive feedback, and we'll continue to iterate on the experience. We've recently completed our third successful launch of Project Kuiper. We haven't launched this service commercially yet but already have an impressive amount of enterprise and government customers who have signed agreements to use Kuiper. In Prime video live sports, our first season of NASCAR drew about 2 million viewers per race and the youngest audience among NASCAR broadcasters in more than a decade. We've recently announced our stellar broadcasting crew for our upcoming first NBA season, including in Eagle, Stan Van Gundy, Kevin Harlan, Dwayne Wade, Taylor Rooks, Blake Griffin, Durgeiski, Steve Nash and Candice Parker. We also announced Denis Vina, an Academy Award nominee, as the Director for the next James Bond film, James Bond is in the hands of one of today's greatest filmmakers, and we cannot wait to get started on 007's next adventure.

Finally, we continue to be very pleased with the growth and residence of Amazon Pharmacy and it's grown 50% year-over-year, year-to-date on an already significant size base. A lot of good things happening across the company. With that, I'll turn it over to Brian for a financial update.

Thanks, Andy. Let's start with our top line financial results. Worldwide revenue was $167.7 billion, a 12% increase year-over-year, excluding the impact of foreign exchange. Foreign exchange had a $1.5 billion favorable impact to revenue in the quarter as foreign currencies generally strengthened versus the U.S. dollar. As a reminder, our Q2 revenue guidance had anticipated an unfavorable impact of approximately 10 basis points or $100 million. Worldwide operating income was $19.2 billion, which was $1.7 billion above the high end of our guidance range.

Across our segments, we continue to prioritize cost-effective innovation that delivers value for our customers. In the North America segment, second quarter revenue was $100.1 billion, an increase of 11% year-over-year. International segment revenue was $36.8 billion, an increase of 11% year-over-year excluding the impact of foreign exchange. Worldwide paid units grew 12% year-over-year. We remain focused on inputs that matter most to our customers. In the second quarter, we saw broad-based strength across our key performance metrics. This includes sharp pricing and more in stock availability as well as record delivery speeds for Prime members. Our millions of global sellers continue to be an important contributor to our vast selection. This helps customers find the items they need and does so at a competitive price. Our investment in tools, services and fast delivery speeds help our selling partners reach more customers and further scale their businesses.

In Q2, worldwide third-party seller unit mix was 62%, the highest ever, up 100 basis points from Q2 of last year. We're also closely monitoring the macroeconomic environment, including the impact of tariffs. As Andy mentioned, our Q2 plan factored in a range of assumptions, not all of which materialized. We will continue to consider a range of assumptions going forward.

Shifting to profitability. North America segment operating income was $7.5 billion, an increase of $2.5 billion year-on-year. North America operating margin was 7.5%, up 190 basis points year-over-year. International segment operating income was $1.5 billion, up $1.2 billion year-over-year. International operating margin was 4.1%, up 320 basis points year-over-year. We're pleased with the strong execution of our operations teams and the positive experience they delivered for customers. In Q2, we saw productivity gains in our transportation network, driven by improved inventory placement, strong leverage on high unit volumes and higher levels of in-demand inventory from both first-party and third-party selling partners. These factors contributed to faster delivery speeds and lower costs. Outbound shipping costs were up 6% year-over-year and continue to grow at a meaningfully slower pace than unit growth, which as I mentioned earlier, was up 12% year-over-year.

We're committed to initiatives that further improve our cost structure. Strategic inventory placement drives multiple benefits, including better in-stock availability, shorter delivery routes and faster customer delivery times. When we optimize inventory location, we can consolidate more items for package, reducing packaging materials and costs. To achieve this, we will continue to improve upon our inbound network, expand our U.S. same-day delivery facilities, including rural communities and implement robotics and automation across our facilities. While year-over-year improvements in operating margin may fluctuate, we have a purposeful strategy to achieve sustained progress over time. Shifting to advertising. Advertising revenue grew 22% year-over-year, driven by sponsored products as we saw strong traffic in our stores.

Advertising remains an important contributor to profitability in the North American International segments. Our full funnel advertising approach of connecting brands with customers is resonating.

Moving next to our AWS segment. Revenue was $30.9 billion, an increase of 17.5% year-over-year. AWS now has an annualized revenue run rate of more than $123 billion. During the second quarter, we continue to see growth in both our generative AI and non-generative AI businesses as companies turn their attention to newer initiatives bring more workloads to the cloud, restart or accelerate existing migrations from on-premise to the cloud and tap into the power of generative AI.

AWS operating income was $10.2 billion. We did see AWS segment margins decline from a record high of 39.5% in Q1 to 32.9% in Q2. The largest quarter-over-quarter driver of the decrease or about half is due to the seasonal step-up in stock-based compensation expense, driven by the timing of our annual compensation cycle. AWS margins also saw headwinds from higher depreciation expense as well as unfavorable impacts from year-over-year fluctuations in foreign exchange rates. The depreciation expense is a result of our growing investments in capital expenditures in AWS. As we've said in the past, we expect AWS operating margins to fluctuate over time driven in part by the level of investments we are making at any point in time. We will continue to invest more capital in chips, data centers and power to pursue this unusually large opportunity that we have in generative AI.

Now turning to our cash CapEx, which was $31.4 billion in Q2. We expect Q2 CapEx to be reasonably representative of our quarterly capital investment rate for the back half of this year. AWS continues to be the primary driver as we invest to support demand for our AI services and increasingly in custom silicon, like Trainium, as well as tech infrastructure to support our North America and international segments.

Additionally, we continue to invest in our fulfillment and transportation network to support growth of the business, improve delivery speeds and lower our cost to serve by investing in same-day delivery facilities as well as robotics and automation. Collectively, these investments will support growth for many years to come.

Moving on to our third quarter financial guidance. As a reminder, our guidance considers a range of possibilities, which take into consideration Q2 results, trends we see quarter-to-date and expectations around the macroeconomic environment, including tariffs. Q3 net sales are expected to be between $174 billion and $179.5 billion. We estimate the year-over-year impact of changes in foreign exchange rates based on current rates, which we expect to be a favorable impact of approximately 130 basis points. As a reminder, global currencies can fluctuate during the quarter. Q3 operating income is expected to be between $15.5 billion and $20.5 billion. In this dynamic environment, we'll focus on what matters most, delivering exceptional customer value through product selection, competitive prices and unmatched convenience. We remain focused on driving a better customer experience and believe putting customers first is the only reliable way to create lasting value for our shareholders. With that, let's move on to your questions.

[Operator Instructions]

Our first question comes from Doug Anmuth with JPMorgan.

I have two. First, can you just help us understand with some more granularity how tariffs are being absorbed across suppliers, Amazon and consumers and whether you anticipate any change going forward? And then second on AWS, we're seeing significantly faster cloud growth among the #2 and #3 players in the space. I totally appreciate that AWS is coming off of a bigger base. But beyond that, do you think the output gap is due more to customer demand or infrastructure supply for both?

Yes. I'll take both of those. I'll start with the tariffs. I think what we said a number of times, and we still believe it is we just don't know what's going to happen moving forward. It's hard to know where the tariffs are going to settle, particularly in China. It's hard to know what will happen when we deplete some of the prebuys that we did on our own first-party retail and then some of the forward deploying that we saw of our third-party selling partners. And if costs go up over time, it's -- we're unsure at this point who's going to end up absorbing those higher costs. What we can tell you is what we've seen so far in the first half of the year, in the first half, we just haven't seen diminished demand. And we haven't seen any kind of broad scale ASP increases. And so that could change in the second half. There are a lot of things that we don't know, but that's what we've seen so far.

On the question on AWS, the first thing I'd say is it's -- as you said, Doug, in your question, you -- year-over-year percentages and growth rates are always a function of the base in which you operate. And we have a meaningfully larger business in the AWS segment than others. I think the second player is about 65% of the size of AWS. And we -- when we look at the results over the last number of quarters, there are sometimes where -- as far as we can tell, we're growing faster than others and sometimes others are growing faster than us. But it's still like if you look at second place player you're talking about, it's a -- it's still a pretty significant segment market segment leadership position that we have. And regardless, these are all really just moments in time. The last week is a moment in time too where -- the reality of what really matters is what customers' experiences are in operating on these platforms. And if you look at what matters to customers, what they care a lot about what the operational performance is, what the availability is, what the durability is, what the latency and throughput is of the various services. And I think we have a pretty significant advantage in that area.

They care a lot about security. If you have data that matters. And for most companies, they're putting data that they really care about in the cloud. The security and the privacy of that data matters a lot, and there are very different results in security in AWS than you'll see in other players. And yes, you could just look at what's happened in the last couple of months, you can just see kind of adventures at some of these players almost every month. And so a very big difference, I think, in security.

And then I think a really significant difference in functionality where not just in the core infrastructure, do we have a lot more functionality in our services. But I think if you look at our end-to-end offering in it's from the bottom of the stack all the way to the top, it's pretty different.

So I feel good about the inputs and the services that we're offering to customers across AI as well as non AI and we have more demand than we have capacity right now. So we could be doing more revenue and helping customers more, and we're working very hard on changing that outcome and how much capacity we have, but it's still -- like if you look at the business, it's $123 billion annual revenue run rate business and it's still early. I mean how often do you have an opportunity that's $123 billion of annual revenue run rate where you say it's still early. It's a very unusual opportunity that we're very bullish about.

Our next question comes from Mark Mahaney with Evercore.

Okay. I'll stick with AWS to start with. Could you just disclose the backlog number? And then in the past, I know you've talked about the supply constraints and hoping that they will sort of resolve themselves by the back half of the year. Is that still your intention? Anything that suggests that the supply constraints are going to get resolved earlier or later?

And then a long-term question on Alexa Plus and I've been experimenting with it for a while. Just Andy, when you think about the potential that, that has in terms of increasing engagement, maybe tapping into some services revenue, advertising, maybe a little bit more retail sales per household, you're just reducing friction. Just talk about what -- from a financial perspective, how you think that could play out, how we would maybe see that in the numbers.

Mark, this is Dave. I'll just start off to give you the backlog figures. So at the end of the quarter, at June 30, that was $195 billion, so that's up about 25% year-over-year.

On the supply constraints as it relates to AWS and what we see there, -- as I mentioned, we have more demand than we have capacity at this point. And I think that -- and you see some of the constraints and they kind of exist in multiple places, the single biggest constraint power. But you also see constraints off and on with chips and then some of the components that -- once you have the chips to actually make the servers, the sometimes you have new generations of chips that are a little bit later than they're supposed to be and sometimes you get the chips and the yield you get in making servers isn't what you expect when you get to ramp.

So there are a bunch of those pieces today that we're working on. It's really true across the industry today. I don't believe that we will have fully resolved the amount of capacity we need for the amount of demand that we have in a couple of quarters. I think it will take several quarters. But I do expect that it's going to get better each quarter, and I'm optimistic about that.

I think on the Alexa question, I think I'd start by saying the Alexa Plus experience is so much better than I think our prior Alexa experience. She's much more intelligent than her prior self. She's much more capable and I would say unlike the other chat bots that are out there today who are good at answering questions, but really can't take any action for you. Alexa Plus can take a lot of action for you, which is very compelling.

So I can ask Alexa to play music for me or play video for me to move my music from one device to another or if I'm listening to a song, that's on -- that's in a movie, I can ask Alexa Plus to actually put that movie scene on -- of the song I'm playing, and it will put it on my Prime video on Fire TV or if I have guests coming over. I can say, Alexa draw the curtains, put the light on the porch and the driveway, increase the temperature by 5 degrees and put on music that would be great for a dinner party. And she does all that just through using natural language. So if she could take a lot of actions and it's compelling. And what we see so far, we've been rolling out Alexa Plus starting in the U.S. It's with millions of customers now. The rest in the U.S. coming in the next couple of months and it's starting the international rollout more broadly later in the year. And customers really like the experience. They recognize how much better it is than what it was before. The ratings are very high. The usage is much more expansive than what they were using before and the number of calls they're making is meaningfully higher.

And I think there are a number of different areas where we'll see benefit. I think first, if you build the world's best personal assistant, that has a lot of utility for customers, and therefore, it gets used a lot. So it means everything from people are excited about the devices that they can buy from us that has Alexa Plus enabled in it. People do a lot of shopping and it's really -- it's a delightful shopping experience that will keep getting better. I think over time, there will be opportunities as people are engaging more multiturn conversations to have advertising play a role to help people find discovery and also as a lever to drive revenue.

And I think over time, you could also imagine, as we keep adding functionality that there could be some sort of subscription element beyond what there is today. Today, Prime members get Alexa Plus for free and non-Prime members pay $9.99 a month for Alexa Plus. So I think it's very -- it's still very early days, but we're very encouraged by the experience we're providing and you can bet we're going to be iterating on it constantly.

And our next question comes from the line of Colin Sebastian with Baird.

I guess, first off, with respect to the International segment and the progress in both revenues and margins. I was hoping you could add maybe some color on the drivers of each of those and the sustainability of the improved efficiency in those markets. And then, Andy, you mentioned [indiscernible]. We haven't heard as much about that of late. So maybe if you could review where things stand relative to next year's launch target timing of the service rollout and maybe any perspective you have on the longer-term ambitions for the satellite network.

Colin, this is Brian. I'll start with the international segment question. So a very strong quarter for International segment, both on revenue growth and also on operating margin. Operating margin was up 320 basis points year-over-year to 4.1%. And if you look, that's the continuation of a strong progression we've seen quarter-by-quarter over the last 10 quarters in total, we've seen an increase of close to 700 basis points during that time period. So really, it's a tale of 2 pieces of segment -- or excuse me, sections within international. One is the the established countries like U.K., Germany and Japan, already at similar margin profiles to the U.S. So we'll -- as they continue to grow their contribution of profit will grow over time, and that's what we're seeing.

In the quarter, we saw strong productivity in our transportation network in those countries, much like we saw in the U.S., and that's led to higher units for package and faster delivery speeds at lower cost. So again, the theme of lower cost to serve and also increased speed and better selection for our customers continues to grow internationally as well. In our emerging countries, we're pleased with the progress we're making there. We've launched 8 countries, of course, in the last 5 years. And there are all varying degrees of upfront investment in different point in times in their journey to profitability, but they're all making very nice improvements quarter-over-quarter in growing selection, adding prime members and expanding our customer offerings.

So I think what you're saying, again, is sustained improvement in those areas. I feel very good about it. The established countries are continuing to grow and develop and very much look like the United States and the emerging countries, again, are all very different stages of growth right now.

On the Project Kuiper question, so Project Kuiper's or low earth orbit satellite constellation that we're putting up and launching and there's 400 million to 500 million households worldwide who don't have broadband connectivity. And it means they can't do a lot of things we take for granted, like education online or business online or shopping or entertainment. There is really a digital divide, and it's much needed. And it's also true for enterprises and for governments that they have assets or needs to have visibility or connectivity that they can't get today given the lack of broadband and a bunch of places around the world. So there's a high need. I would say that as we get our constellation into space, there will really be 2 players that have what I would consider the modern technology in low earth orbit satellite. One is the incumbent in the market today and the second will be Project Kuiper. I think that we will have a pretty meaningful differentiation here in performance.

If you look at the performance of what I expect on the uplink and downlink, I think Project Kuiper will be advantaged. I also think the pricing is going to be very compelling for customers.

And then I think if you think about the 3 key customer segments who want lower earth orbit satellite, consumers enterprises and governments. We have very strong relationships with all 3 customer segments given our consumer businesses and our AWS business, and I think if you think about enterprises and governments, a lot of what they want to do when they take the data down from space as they actually want to put it into a cloud to do analysis, analytics and AI and various operations on top of it.

And the fact that Project Kuiper and AWS are so seamlessly connected is very attractive to enterprises and to governments. And I'm kind of amazed we haven't launched Project Kuiper yet. But the number of enterprise and government [indiscernible] that have been signed already to use Project Kuiper is impressive. So we're working very hard to get the satellites into space. We have some delays with some of the rocket providers, but we have most of the available rocket launches over the next couple of years and were very helpful to get the service into commercial into commercial data later this year or early next year.

And our next question comes from the line of Brian Nowak with Morgan Stanley.

Andy, I have two for you on AWS. They're a little tough, but I'm going to throw at you. So there is a Wall Street finance person narrative right now, that AWS is falling behind in Gen AI with concerns about share loss to peers, et cetera. Can you just sort of address that? What is your rebuttal to that? And talk to us about your and the team's most important focal points. Just to ensure that AWS stays on the nice edge of innovation versus hyperscaler peers? And then secondly, I know AWS is a big business. But is there any reason to assume it shouldn't accelerate in the back half and into '26 given the size of the opportunity and all of the Gen AI capabilities that are going to sort of come to us in the next 12 months?

Yes. So on the first one around AI. The first thing I would say is that I think it is so early right now in AI. If you look at what's really happening in the space, you have -- it's very top heavy. So you have a small number of very large frontier models that are being trained that spend a lot on computing, a couple of which are being trained on top of AWS and others are being trained elsewhere. And then you also have, I would say, a relatively small number of very large-scale generative AI applications. The one category would be chatbots with the largest by a fair bit being ChatGPT, but the other category being really, I'll call it, coding agents. So these are companies like Cursor, Versall, Lovable and some of the companies like that. Again, several of which run significant chunks on top of AWS. And then you've got a very large number of generative AI applications that are in pilot mode -- or they're in pilots or that are being developed as we speak and a very substantial number of agents that also people are starting to try to build and figure out how to get into production in a broad way, but they're all -- they're quite early.

And many of them that are out there are they're significant, but they're just smaller in terms of usage relative to some of those top heavy applications I mentioned earlier. We have a very significant number of enterprises and startups who are running applications on top of AWS' AI services and then -- but they're all -- again, like the amount of usage and the expansiveness of the use cases and how much people are putting them into production and the number of agents that are going to exist. It's still just earlier stage than it's going to be and so then when you think about what's going to matter in AI, what's going to -- what are customers going to care about when they're thinking about what infrastructure use, I think you kind of have to look at the different layers of the stack. And I think for those that are both building models, but also just -- if you look at where the real costs are, they're going to ultimately be an inference today, so much of the cost in training because customers are really training their models and trying to figure out to get the applications into production.

But at scale, 80% to 90% of the cost will be an inference because you only train periodically, but you're spinning out predictions and inferences all the time. And so what they're going to care a lot about is they're going to care about the compute and the hardware they're using. And we have a very deep partnership with NVIDIA and will for as long as I can foresee, but we saw this movie in the CPU space with Intel, where customers are anchoring for better price performance. And so we built just like in the CPU space, where we built our own custom silicon and building Graviton which is about 40% more price performance than the other leading x86 processors. We've done the same thing on the custom silicon side in AI with Trainium and our second version of Trainium2 is really -- it's become the backbone of Anthropic's next Claude models they're training on top of, and it's become the backbone of Bedrock and the inference that we do.

So I think a lot of the inference, it's about 30% and 40% better price performance than the other GPU providers out there right now, and we're already working on our third version of Trainium as well. So I think a lot of the compute and the inference is going to ultimately be run on top of Trainium2.

And I think that, that price performance is going to matter to people as they get to scale. Then I would say that that middle layer of the stack are really -- it's a combination of services that customers care about to be able to build models and then to be able to leverage existing leading frontier models and then build high-quality generative AI applications that do inference at scale. And we see it for people building models, they continue to use Sagemaker AI very expansively, and then Bedrock, when you're leveraging leading frontier models is also growing very substantially.

And as I said in my opening comments, the number of agents of scale is still really small in the scheme of what's going to be the case, but part of the problem is it's actually hard to actually build agents. And it's hard to deploy these agents in a secure and scalable way. And so I think the launches we made recently in strands that make it much easier to build agents and then agent core that make it much easier to deploy at scale and in a secure way are being very well received and customers are excited is going to change what's possible on the agent side.

And then I think that it's -- you've got a very large number. I mean, remember, 85% to 90% of the global IT spend is still on premises. If you believe that equation is going to flip, which I do, and we do. You have a lot of legacy infrastructure that you've got to move. These are mainframes. These are VMware's instances and when we build agents like AWS Transform to make it much easier to move mainframe to the cloud, much easier to move VMware to the cloud, much easier to move .NET windows to .NET Linux to say, those are compelling for enterprises or things like Kiro that allow customers to develop in a much easier way and in a much more structured way, which is why I think people are excited about it.

So I think I really like the inputs and the set of services that we're building in the AI space today. Customers really like them and it's resonating with them. I still think it's very early days in AI and in terms of adoption. But the other thing I would just say is that. Remember, because we're at a stage right now where so much of the activity is training and figuring out how to get your gender of AI applications into production. People aren't paying as close attention as they will and making sure that those generative AI applications are operating where the rest of their data and infrastructure. Remember, a lot of general AI, inference is just going to be another building block like compute, storage and database. And so people are going to actually want to run those applications close to where the other applications are running, where their data is.

There's just so many more applications and data running in AWS than anywhere else. And I'm very optimistic about as we get to a bigger scale what's going to happen to AWS on the AI side. And I think we have a set of services that is unique top to bottom in the stack. I think on the last part about what do we expect with respect to acceleration, we don't give guidance by segment. So I'm not going to try and give you guidance. But I do believe that the combination of more enterprises who have resumed their march to modernize their infrastructure and move from on-premises to the cloud, coupled with the fact that AI is going to accelerate in terms of more companies deploying more AI applications into production that start to scale, coupled with the fact that I do think that more capacity is going to come online in the coming months and quarters, make me optimistic about the AWS business.

Thank you. And the next question comes from the line of Ron Josey with Citi.

That was really helpful. Maybe taking that same question, but focusing internally on Amazon, I think you penned an article or a blog post back in June, just talking about the ability or potential with AI agents and improving efficiencies and speed to market internally. So would love to hear your thoughts as you think about how Amazon is adopting generative AI internally, how perhaps you've seen improving speed to market as a result of everything you've just talked about.

Yes. I think that AI is the biggest technology transformation for a lifetime, which is saying a lot because even in some of our relatively short lifetimes, we've been through the cloud, mobile and the Internet itself. But I think it's going to be the biggest transformation technically in our lifetime. And I think it's going to not only change every customer experience that we know and enable customer experience we really only dreamed about before, but it's also going to change very substantially the way we work. And if you think about it, the way that we do coding, the way that we do analytics, the way that we do research, the way that we do finance and measure -- I mean, really, the way we do business process automation, the way we do customer service.

Every single area that I can think of in the way we work is likely going to be impacted in some meaningful way by AI. And I think when you have a big shift like that, you have 2 macro choices. You can either decide that you're going to embrace it. and you're going to help shape it and you're going to figure out how to build the right tools to allow you to take advantage of the technology or you can wish it away and have it shape you. And the posting that you're referencing, Ron, that I made was just really being clear with the team that we're going to pursue that former approach. We are going to embrace it. We're going to try and shape it. So we have a number of tools and agents that we've built already inside the company.

These are things like if you think about Kiro and the opportunity to have coding agents do a lot of a coating that's very compelling. It's going to allow our teammates to be able to start from a more advanced starting spot and to be able to invent for customers much more quickly and much more expansively. If you think about services like Connect, which is our AWS service, it does call center software that has a lot of AI built into it that changes the productivity of all your customer service agents. And you can just imagine across the board, the types of things we're going to do to make it easier to get software out to build high-quality software to do operations to automate a lot of the business process coordination that happens inside the kind. We're going to work on a whole bunch of those areas to allow ourselves primarily to be able to invent for customers much more quickly and expansively. But also, I think it's going to make all of our teammates jobs much more enjoyable because they won't have to do as many of the road parts of the job that we all do right now, and they're going to be able to own more pieces of what they're trying to solve for customers. And we want deep owners that want to own as much end-to-end as possible.

And our final question will come from the line of Justin Post with Bank of America.

Great. I'll just ask on the revenue guidance. It looks pretty robust growth in the third quarter. I know you won't say whether AWS is expected to accelerate. But could you talk about some of the drivers and what kind of tariff and other contingencies you've put in there? And then maybe any thoughts on how you're thinking about how the Q4 is shaping up.

Justin, this is Brian. I'll take this one. We've guided to $174 billion to $175 billion. And we -- excuse me, $179.5 billion is a typo. We feel good about the growth rate in Q2 that we had and the acceleration in a number of areas, including units. And we had a very successful Prime Day earlier this month. So there is uncertainty on where tariffs will settle and maybe the ultimate impact on consumers, as Andy mentioned earlier. But we feel really good about the key inputs we control price selection and convenience. We've talked about delivery speeds increasing. We've talked about selection increasing high-end stock levels, well dispersed inventory close to customers. So we think that all works in our favor. So I would say we're cautiously optimistic I'm not going to give any guidance for Q4 at this time, but we'll talk about that next time.

Thanks for joining us on the call today and for your questions. A replay will be available on our Investor Relations website for at least 3 months. We appreciate your interest in Amazon, and we look forward to speaking with you again with you next quarter.

And ladies and gentlemen, that does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.