The margin rate is going to fluctuate and this business is going to be always a factor of new investment and things like the sales force and new regions and infrastructure capacity offset by infrastructure efficiency gains that we see. Net sales are expected to be between $125.0 billion and $130.0 billion, or to grow between 13% and 17% compared with third quarter 2021. This guidance anticipates an unfavorable impact of approximately 390 basis points from foreign exchange rates. We saw another strong quarter of innovation and customer engagement in AWS, where net sales were $19.7 billion in Q2, up 33% year-over-year, and now represented an annualized sales run rate of nearly $79 billion. AWS continues to grow at a fast pace, and we believe we are still in the early stages of enterprise and public sector adoption of the cloud.

• In addition, foreign exchange headwinds likely hurt the second-quarter’s revenue because the U.S. dollar has gained strength against other currencies over the last year.
• And as I mentioned in-stocks never been higher, delivery speed is increasing.
• On the company’s earnings call, CFO Brian Olsavsky touted the company’s advertising business, noting that it has grown while others have begun to see slowdowns.
• We’ve invested a lot in tools and capabilities and, of course, the delivery capabilities and all the things that go along with that.

We expect infrastructure to represent a bit more than half of our total capital investments in 2022. For the worldwide stores business, we’ve continued to moderate our build expectations to better align with customer demand. We expect the fulfillment and transportation dollars spent on capital projects to be lower in 2022 versus the prior year. Cloud spending has remained resilient despite the looming economic downturn, as the modernization of technology stacks continues to be viewed as a critical enabler of operational and economic efficiency.

We’re all about obviously is price selection and convenience. And when it’s part of FBA can also help as being more Prime eligible and available to ship in one, two days or whatever the Prime offer happens to be. So we’re happy with the selection that we’ve added from third-party sellers. And I think that shows in the percentage mix that you see. We’re proud of the investment we’ve made to build tools and products that allow sellers to be successful on our site. And it’s a great partnership and it’s worked really well.

It sounds like you’re going to have revenue up nicely. You talked about the efficiencies of the $1.5 billion quarter over quarter and some of the incremental investments in content, etc. On the transportation side, we continue to improve delivery, route density, and improve package deliveries per hour. Our guidance also assumes, among other things, that we don’t conclude any additional business acquisitions, restructurings, or legal settlements.

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So I think sellers are — sellers business remains strong and an integral part of our customer offering. I was hoping you could comment on whether AWS is seeing similar dynamics. And then also, when you think about margins, the 35% for AWS in 1Q going to 29% in 2Q. Again, it’s not — we’re not seeing it hit our businesses https://bigbostrade.com/ directly. But we’re cognizant that things could change quickly, and we’ll see and monitor, and that’s how we set our forward guidance. During the quarter, we saw improvement in many of our key operational metrics, including in-stock levels and delivery speed, and saw a subsequent step-up in consumer demand.

First is the unfavorable comparison to very high holiday-level utilization rates that we saw in the first half of 2021; and second is the normal step down in volumes off of our Q4 peak that we saw in the first half of 2022. On the first point, we expect this challenging year-over-year comp will have ended in Q2. Last quarter’s net loss was $3.8 billion, or $7.56 per share ($0.38 per share when adjusted for the 20-for-1 stock split in June).

We’ve invested a lot in tools and capabilities, and of course, the delivery capabilities and all the things that go along with that. But that’s an opportunity for us to support merchants who may or may not be FBA sellers with the tools and the opportunity just to sell their products online and scale their business and build their brand. And so I think I’m really excited about, of course, getting to be able to launch this program over the last few months and dialing it up for more sellers as the year progresses. And the second part would be away from the e-commerce-driven parts of advertising.

It’s — we’re interested in learning and working with FBA sellers that we’ve known and had good trust with but also expanding it. So those are some of the opportunities and challenges that as you think about kind of where we are in the U.S. versus international that are out there, the network complexities. Of course, there are some regulatory hurdles and other differences out there.

Q2 of last year was also when vaccines had become more available, particularly in the United States and we began to see more normal shopping patterns. This year’s Prime Day sales event occurred on July 12th and 13th, and is incorporated into our third quarter guidance. While demand has remained strong, the lapping of this high growth period, depressed our revenue growth rate for the following 12 months ending in May of this year.

And as I mentioned in-stocks never been higher, delivery speed is increasing. So not to mention a lot of the new content, especially on the video side that will be coming in the fall. In our established international locations, UK, Germany, Japan, over time, we’ve continued to improve the profitability of that business as we build out and established stronger customer relationships and work on the cost structure and how we serve folks.

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The Texas company had a strong second-quarter report. Six-month revenue was $362 million, up 61.3% year over year. Even without additional SeaSpine-related sales, Orthofix sales would have been up 7% year over year. The company, thanks to the expense of the merger, said it had a six-month earnings-per-share (EPS) loss of $2.77 compared to an EPS loss of $0.10 through the first six months of 2022. And, Jason, on your second question related to the international and the profitability there reported.

There’s still significantly a penalty year over year. Other cost pressures are principally on our cost and employees. If you look at our stock-based comp as a percent of revenue, it’s gone up 150 basis points quarter over quarter as we stepped up from Q1 to Q2. We see that pattern every year, but we don’t see that magnitude, and that’s where a lot of our wage inflation is for, particularly our technical employees. We just have to keep you posted as we go quarter-to-quarter on what our expectations are.

So we feel good about the program and the state of the Prime members after a very rough couple of years of pandemic turmoil, and we think it’s a good base to build upon. Eric, I’ll just add a little more on advertising because you’re probably wondering again about softness — potential for softness in that or macroeconomic factors. Again, it’s got to be a positive both for the customer and for the brand. The first one, Brian, I wanted to talk a little bit about the bridge from 2Q to 3Q EBIT guide a little bit.

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Our macroeconomic issues are principally on inflation, and we’ve been pretty transparent on that. I think the new thing this quarter is additional pressure on the energy electricity rates in our data centers because of the ramp-up in natural gas prices if you’ve seen that. And then the other inflationary factors, well, some of them are coming down slightly.

First is the unfavorable comparison to very high holiday level utilization rates that we saw in the first half of 2021. And second is the normal step down in volumes off of our Q4 peak that we saw in first half of 2022. We made strides to improve fulfillment network productivity in Q2. Staffing levels were more in line with rising Q2 demand, and we saw better optimization of our fulfillment network.

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Some of your peers in the cloud space have talked about some slowdown in booking rates just as customers take longer to work through deal terms and duration. So if you could comment on whether AWS is seeing similar dynamics? And then also when you think about margins, the 35% for AWS in 1Q going to 29% in 2Q, what are some of the puts and takes that we should think about going forward just given decreasing server life benefits and tougher macro environment? Joining us today to answer your questions is Brian Olsavsky, our CFO.

So in any particular year when we’re spending capital, a good portion of it, we estimate about 40% this year is being spent in support of warehouses or transportation capacity. That will be opening up and effective in 2023 and beyond. So there’s always a pre-spend to keep the – again, the pipeline moving. So when we make adjustments to the time horizon, the impact is not as great as you might expect in the year 2022. Again, we have moved things out and capital is coming down in those areas as we just mentioned.

We’ll just have to keep you posted as we go quarter-to-quarter on what our expectations are. For full-year 2022, we do expect to spend slightly more on capital investments than last year, but the proportion of capital spending shifts among our businesses. We expect technology infrastructure spend to grow year-over-year, primarily to support the rapid growth in innovation we are seeing with AWS.

On the bridge to Q2 to Q3, so again, you have the — mentioned three items, ops improvement that we see of $1.5 billion and offsetting that is increased costs in AWS as we build out depreciation. We also are adding — continuing to add people in that space, product engineers, sales people, customer support. Speaking more broadly, we know AWS is a huge opportunity. Our comments islamic forex accounts and responses to your questions reflect management’s views as of today, July 28, 2022, only and will include forward-looking statements. 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.

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Again, a reminder that this year, our Prime Day sales event occurred on July 12th and 13th, and is incorporated into our third quarter guidance. For revenue, note that our guidance includes an estimated approximately 390 basis points of unfavorable impact from year-over-year change in foreign exchange rates. The estimated FX impact to operating income is not significant. Before we get the questions, I’ll make some comments about our Q2 performance and the outlook for Q3.

Fears of recession also could threaten AWS’s growth in the medium-term. For instance, analysts at Mizuho Securities — James Lee and Wei Fang — worry that recession fears will cause corporate spending on cloud services to decline in the foreseeable future, a shift that could negatively affect AWS, according to a July 20 note. The e-commerce giant also reported better than expected guidance for next quarter of $125 billion to $130 billion versus $126.5 billion. For the twelve months ended June 30, 2020 and 2021, this amount relates to property included in “Principal repayments of finance leases” of $10,504 million and $11,435 million. For the twelve months ended June 30, 2020 and 2021, this amount relates to equipment included in “Property and equipment acquired under finance leases” of $13,110 million and $9,976 million. I would note that we’re still up 188,000 year-over-year and nearly double the headcount of what we had heading into the pandemic in early 2020.