Amazon.com Inc. Chief Executive Officer Andy Jassy today released his second annual letter to shareholders since taking over the helm from company founder Jeff Bezos.

Bezos penned a memo to shareholders every April starting from 1997, the year Amazon went public. Jassy (pictured) published his first shareholder letter in 2022, focusing on topics such as the company’s supply chain and cloud business. 

Today’s letter covers many of the same areas. However, it places a larger emphasis on artificial intelligence, which has taken on new significance for the tech industry over the past year. AI is also becoming a bigger focus for Amazon Web Services Inc., which released a new set of machine learning services this morning in conjunction with the publication of Jassy’s letter.

AI-supported logistics

Amazon doubled the number of fulfillment centers it operates between 2019 and 2022 to keep up with surging e-commerce demand. In response to the current macroeconomic headwinds, the company is now working to make its fulfillment center network more efficient. The company has “redesigned scores of processes and mechanisms” across its supply chain over recent quarters, Jassy detailed in today’s letter.

Amazon until recently operated its logistics warehouses in the U.S. as a single fulfillment network. Recently, Jassy detailed, the company has split its fulfillment network into eight “regions” to increase efficiency. The eight regions are interconnected, but can operate in a largely independent manner.

AI is a major element of Amazon’s efforts to streamline its logistics network. “We also continue to improve our advanced machine learning algorithms to better predict what customers in various parts of the country will need so that we have the right inventory in the right regions at the right time,” Jassy wrote. When a product is available at a facility near a customer, it doesn’t have to be shipped from a remote warehouse. 

“Shorter travel distances mean lower cost to serve, less impact on the environment, and customers getting their orders faster,” Jassy explained. “We’re on track to have our fastest Prime delivery speeds ever in 2023.”

Cloud in focus

AWS, which operates at a $85 billion annual run rate and accounts for the bulk of its parent company’s profits, also featured prominently in Jassy’s letter. This year, Jassy placed a particular emphasis on the cloud giant’s growing portfolio of AI-related offerings.

It has developed two lines of chips optimized specifically for machine learning workloads. Its AWS Trainium chips are designed for AI training, while the AWS Inferentia processor line is geared towards inference, or the task running neural networks in production. According to Jassy, Inferentia-powered instances have saved Amazon and other users more than $100 million in capital expenses since 2019.

Jassy noted that optimizing infrastructure expenses has become a bigger priority for AWS customers in the current economic environment. However, “many of these AWS customers tell us that they’re not cost-cutting as much as cost-optimizing so they can take their resources and apply them to emerging and inventive new customer experiences they’re planning,” Jassy wrote. 

“While these short-term headwinds soften our growth rate, we like a lot of the fundamentals that we’re seeing in AWS,” he added. “Our new customer pipeline is robust, as are our active migrations.”

Growth areas

Amazon is pursuing growth opportunities in several markets beyond the e-commerce and cloud segments. In today’s shareholder letter, Jassy highlighted the company’s ad unit, which generated revenues of $11.6 billion last quarter. The ad unit enables brands to promote their products through Amazon’s e-commerce marketplace. 

Jassy detailed that the company is investing in new machine learning software to improve ad targeting. “We also see future opportunities to thoughtfully integrate advertising into our video, live sports, audio, and grocery products,” he added. Last December, reports emerged that Amazon is developing a sports streaming app, which could expand its ad delivery reach. 

The company also operates in a variety of other markets. In his letter, Jassy pointed out growth opportunities across areas such as healthcare and grocery retail where Amazon is making particularly significant investments. Jassy also dedicated an entire paragraph to generative AI, stating that Amazon is “investing heavily” in the technology.

“We have been working on our own LLMs for a while now, believe it will transform and improve virtually every customer experience, and will continue to invest substantially in these models across all of our consumer, seller, brand, and creator experiences,” Jassy wrote. 

Photo: SiliconANGLE