Amazon.com Inc. Chief Executive Andy Jassy today published his latest annual letter to shareholders, continuing a practice that was started by company founder Jeff Bezos nearly three decades ago.

Jassy took over the task of writing the memo after becoming CEO in July 2021. The following April, the executive’s first-ever shareholder letter discussed Amazon’s e-commerce platform and Amazon Web Services Inc. as well as its emerging businesses. Today’s letter covers many of the same areas with an expanded focus on the company’s artificial intelligence strategy.

In 2023, AWS grew at a slightly faster pace than Amazon as a whole by increasing its revenue 13% year-over-year, to $91 billion. The unit achieved this growth despite the fact that many enterprises scaled back their cloud spending. Cost-cutting initiatives are now starting to make way for new technology projects, Jassy detailed in today’s letter.

“By the end of 2023, we saw cost optimization attenuating, new deals accelerating, customers renewing at larger commitments over longer time periods, and migrations growing again,” Jassy wrote.

One of the AWS offerings that is benefiting from the rebounding demand is Amazon Bedrock. Introduced last April, the service provides access to foundation AI models from AWS, third-party providers and the open-source ecosystem. Jassy detailed today that tens of thousands of customers have adopted the service to date.

Amazon’s AI strategy has three core elements, the executive elaborated. The first two focus on helping companies build custom foundation models and customize existing models using their own data. The third component of the strategy is to provide AI-powered applications such as Alexa and Amazon Q, a coding assistant available in AWS. Jassy stated that the company is “investing deeply” across all three areas.

In the e-commerce market, meanwhile, Amazon spent the past year making its supply chain more efficient. The company broke several of its internal package delivery speed records in 2023. “Amazon delivered at the fastest speeds ever to Prime members, with more than 7 billion items arriving same or next day, including more than 4 billion in the U.S. and more than 2 billion in Europe,” Jassy detailed.

The executive attributed the logistics speedup Amazon achieved in the U.S. to two main factors. First, the company placed merchandise closer to customers as part of an initiative designed to reduce shipping times. In parallel, it built more logistics facilities optimized specifically to enable same-day delivery.

Those investments have helped Amazon not only reduce wait times for customers but also cut costs. “In 2023, for the first time since 2018, we reduced our cost to serve on a per unit basis globally,” Jassy disclosed. “In the U.S. alone, cost to serve was down by more than $.045 per unit YoY.” He added that the company has identified several areas where it can reduce logistics expenses even further going forward.

Amazon’s core e-commerce and cloud businesses weren’t the only focus of Jassy’s letter. He also gave shareholders an update about several of Amazon’s newer ventures. 

Last year, the company launched a service that lets brands display ads to users who stream TV shows and movies via Prime Video. Jassy wrote that Amazon’s streaming TV advertising business is “growing quickly and off to a strong start.” The company’s advertising revenue jumped 24% year-over-year in 2023, to $47 billion. 

Jassy also revealed that Amazon expects to deploy its first two production satellites later this year. The satellites will be launched as part of Project Kuiper, a $10-billion-plus initiative through which the company hopes to build a Starlink-like internet constellation. Jassy wrote in today’s shareholder letter that Project Kuiper represents a “very large revenue opportunity for Amazon.”

Photo: SiliconANGLE