How Amazon crushed their 2023 Q2 Earnings

    August 4, 2023

    Amazon had an incredibly successful 2nd quarter of 2023, reporting $7.68 Billion in Operating Income (+132% vs Q2 ’22) and $7.8 Billion in Free Cash Flow (versus a -$23 Billion Free Cash Flow in Q2 2022).

    Here is a breakdown of what exactly drove this incredible quarter of growth.


    • AWS: $5.4 Billion (🔴 -$0.3 Billion)
    • International: -$0.9 Billion (🟠 +$0.9 Billion)
    • North America: $3.2 Billion (🟢 +$3.8 Billion)

    North America drove 40%+ of profits in Q2, but sales are only up 11% meaning majority of improvements are coming from cost improvements, and change in revenue mix of more profitable revenue streams on Amazon’s side.

    In our data at CommerceIQ we have observed a reduction in unit margin of brands from 23% in June 2022 to 20% in June 2023.

    Amazon cites the reduction of “cost to serve” as the key driver for this profit improvement, specifically sharing “shipping costs and fulfillment costs continuing to grow at a slower pace than [their] unit growth” and “regionalization [being] an important contributor, [with] faster delivery speed[s] from better network connectivity and better inventory placement mean[ing] less miles traveled and fewer touches, resulting in less cost” for Amazon

    One important point of focus on the Free Cash Flow improvements as it relates to brands is Amazon’s continued desire to improve inventory efficiencies.

    In the past, Amazon’s “working capital hasn’t been as efficient as [they] held higher weeks of cover of inventory in the face of supply chain disruptions. Most recently, as these disruptions continue to ease, [they] are improving [their] inventory efficiency, resulting in improvements in [their] working capital.”

    3P mix grew to 60% in Q2 which is the highest level Amazon has ever seen.

    Our data also shows a reduction in ordered units, as well as on hand inventory being down between 16% to 17% QoQ, providing evidence of Amazon’s pull back on inventory.


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