Background Information:

Previous Years

In the years leading up to 2022, Amazon experienced significant growth in its revenue and market capitalization. The company's core business segments, including e-commerce, cloud computing (Amazon Web Services), and advertising, played key roles in driving its financial performance. Amazon consistently reported robust revenue growth. The company's e-commerce platform remained a major contributor, with the expansion of its product offerings, increased Prime memberships, and strong holiday sales. Additionally, Amazon Web Services (AWS) continued to be a significant revenue generator. AWS, Amazon's cloud computing division, was a major driver of profitability. It provided cloud services to a wide range of businesses, contributing significantly to Amazon's overall revenue and profits.

Despite high levels of revenue, Amazon's operating income and net profits could be relatively modest due to its strategy of reinvesting heavily in the business. The company frequently focused on expanding its infrastructure, enhancing its delivery network, and investing in emerging technologies. Amazon continued to invest in various areas, including technology, logistics, and content. Amazon's stock price experienced fluctuations but generally trended upward, leading to an increase in the company's market capitalization. The company's market capitalization made it one of the most valuable publicly traded companies. It's important to note that the financial trajectory of any company can be influenced by a variety of factors, including economic conditions, competition, regulatory developments, and changes in consumer behavior.

2018-2022 Annual Data

"Amazon annual revenue for 2022 was $513.983B, a 9.4% increase from 2021. Amazon annual revenue for 2021 was $469.822B, a 21.7% increase from 2020. Amazon annual revenue for 2020 was $386.064B, a 37.62% increase from 2019" (Macrotrends, 2023).

Revenue

When comparing Amazons Revenue per employee to their competitors, we found see that they were the least effective, generating about 333 thousand dollars per employee in 2022. The competitor with the highest revenue per employee in 2022 was Netflix at about 2.47 million. Though when looking at Amazons overall revenue growth for the past five years there is an increase each year. Revenue was at $232,887 in 2018 then rose to $513,983 in 2022. Even though there was a steady increase in revenue growth, there was a shift in the growth rate. From 2019 to 2020 there was a decline in revenue as a result of the pandemic.

International Market

Amazon serves over 50 countries around the world. Each country with differing sales contributing to Amazons overall profits and sales. The country with the most sales is the United States, which is about 69.3% of amazon's revenue. International sales reported in 2023 was about 26.5% which was-1% year-over-year. During the period between 2018 and 2022, amazon continued to expand its international operations, entering new markets and while increasing its presence in existing ones.

Competitors

When looking at Amazons biggest competitors, three were the most apparent. For our research we looked at the gross profits, expenses, and annual sales of Ebay, Google, and Walmart. When comparing the data to Amazon we found that Walmart was #1 when it came to Annual Sales, and Amazon had the highest expenses. Compared to its competitors Amazon is currently 2nd highest in sales, but lowest when it comes to their gross profits. Overall, the Amazon's market shares gradually climbed up from 2018 in 17.62 to 2022 in 24.851

Executive Compensation

In terms of Executive Compensation, some execs made more from 2019 to 2022 than others. This could be due to the importance of their work or the fact that they could be paid mostly in stock. Shelley L. Reynolds "owns over 3,100 units of Amazon.com stock worth over $16,199,270 and over the last 16 years she sold AMZN stock worth over $1,280,475" (Wallmine, 2023).

Pandemic Impact

During the Pandemic, Amazon experiences a change in their financials. The number of prime memberships and employees, revenue from Merchant Listings, advertising business revenue, as well as revenue from amazon prime subscriptions all increased as a result of the pandemic. With the pandemic causing shifts in online sales as well as consumers receiving stimulus checks, Amazon saw sales of about $108.5b in the first three months of the year. This number was a 44% increase in sales as opposed to the previous year. There was also a profit of about $8.1B, which was an increase of 220% as compared to the last year.

Amazon's expectation for the nest fiscal year

After regression analysis, we found that net sales of Amazon are considerably impacted by technology and content expenses. The formula of the regression analysis is Y (net sales) = 6.52X (technology and content expenses) + 67898194.2. According to Amazon's financial report, the expected technology and content expenses in 2024 is 84762000 (in thousands). Hence, we predicted Amazon's net sales in 2024 to be 618,851,194 (in thousands).

Regression Analysis: Tech & Conent Expenses vs Net Sales

The application of AI to track customers consuming behaviors and applies these data to promote sales growth

Amazon has grown as an e-commerce company since its startup in 1995. Within the 28 years, Amazon become the largest online retailers in the U.S. and the company aimed to be 'Earth's most customer-centric company'. Without the assistance of AI, Amazon may not grow as fast as it is currently. Actually, it is one of the first companies to utilize AI to increase profit and boost performance. The recommendation engine is one of the most useful tools Amazon used to increase its sales. It is designed to recommend goods to each customer individually according to their consuming behaviors. Customers themselves may not realize they are in need of these goods. However, after the recommendation, their chances of purchasing the products increased. According to the McKinsey study, over 35% of Amazon sales are generated by recommendation algorithms.

There are mainly three types of recommendations. Firstly, 'recommended for you'. This kind of recommendation introduces goods to customers by category. For example, if customers want to purchase kitchen ware, then Amazon will recommend the goods with highest sales volume or have the highest ratings. Secondly, related products. Amazon's algorithm automatically recommends goods that are similar to those they have viewed recently. But these related products may have different prices, colors or brands. Lastly, recommend products based on previous purchases. These products may supplement the use of the goods they previously bought. For example, if a customer purchased an iPhone, Amazon may recommend him mobile phone cases.

One of the Amazon AI and machine-learning efforts is Alexa voice assistant, which allows Amazon users access to cloud-based tools, enhances the efficiency for shoppers to grab items from Amazon Go stores, and guides robots carry on the products to workers directly. That drives the market capitalization of Amazon to reach one trillion dollars. In addition, the evolution of Alexa, Echo smart speaker assists the company occupied 70% of market in 2020, significantly beating up some Amazon's competitors such as Apple and Alphabet. (Taulli,2021). Since Amazon has massive-based data system, therefore, the product recommendation system utilized by Amazon allows it to segment its customers, and Amazon changes its prices accordingly based on consumers' interest toward products, the product prices change every 10 minutes, about 2.5millions a day based on two factors which are competitors pricing and inventory availability.

The profit model of Amazon

Although Amazon's primary proportion of sales comes from its online market space (in 2022, Amazon's online sales has reached $639,425 (in thousands)), it is also known as an e-commerce company which generates revenue through different channels and diversified business model. Apart from its online market space, the rest of Amazon's revenue comes from physical stores, Amazon AWS, subscription services, third-party seller services and advertising services. The following explains how Amazon generates revenue through all these channels.

-online stores: include product sales, digital media content (videos, games, music and software) and digital product subscriptions which provide unlimited viewing or usage rights.

-physical stores: sell products that customers can choose from offline. Customers can also pick up the items they buy online in these physical stores.

-third party seller services: Amazon charges commission and shipping fees from third party sellers who utilize the online platform to sell their products.

-subscription services: Amazon Prime members have to pay a subscription fee monthly or annually to acquire the services provided by Amazon (fast and free shipping services, exclusive discounts on products, free movies and shows, etc.)

-AWS: global sales of computing, storage, database and other services.

Amazon's online stores heavily rely on Prime memberships. Among all the customers who purchase on Amazon's online store, Prime members occupy a considerably large proportion. From the graph below, we can infer that over 60% of the online customers have prime memberships and its proportion is continuously growing. In March 2023, it reached 71%..

In addition, Amazon Prime day sales also increased from 2016 to 2023. In 2023, the sales on Prime day have reached $12.7 billion. The graph below demonstrates the sales growth on Amazon's Prime day.

Question: Create a conclusion based on the information I provided. Make a connection between different aspects of Amazon's financial situation with common trends or common traits. In addition, you can consider the time factor like pre-pandemic, during pandemic and post-pandemic period (Like why ROI for Amazon maintain robust during the pandemic but has a sharp drop during the post-pandemic period, which my answer could be the consumers return to shopping in stores and spend on things like travel and restaurants). Make these into one paragraph, please.