Amazon: The Cash Printer is Back On

Q3 2023 ER

Edited by Brian Birnbaum and an update of my original Amazon deep dive and my Q2 update.

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In Section 1.0 I review the Amazon thesis and explain how the company´s cash flow profile is turning around.

In Section 2.0 I explain how North America is driving differential cash flows.

In Section 3.0 I analyze the potential of AWS, now that it is pointing at Generative AI.

In Section 4.0 the surprising strength of Amazon´s advertising business.

In Section 5.0 I review Amazon´s balance sheet and I conclude the write up.

1.0 Thesis Recap

Amazon´s operating and free cash flows are evolving as I hypothesized both in my original deep dive and in my Q2 update.

I published my Amazon deep dive on the 29th of January 2023, just one month after the stock hit $81–levels not seen since 2019. I pointed out that, despite the market´s pessimism, Amazon was gearing up to yield record operating and free cash flow per share.

I predicted that free cash flow would ultimately track Amazon´s increased capacity–i.e. ability to serve customers–at a lower cost. Indeed, it has. 

Amazon is now serving customers more rapidly, expanding the use cases for which customers resort to the company.

Building on the momentum from last quarter, we set another record for delivery speed. For the year-to-date period through the third quarter, we have delivered at the fastest speeds ever in the United States.

These improvements in delivery speeds have been a key driver of growth and are resulting in increased purchase frequency by our Prime members.

-Brian Olsavsvky, Amazon CFO during the Q3 2023 conference call.

Below we see cash from operations reversing upwards. reaching new highs for twelve trailing months.

$AMZN Operating Cash Flow in the TTM per Quarter, $.

Free cash flow, although not at record levels, is trending in the right direction and is set to soon reach all time highs.

During this period, share count has barely increased, setting the company up for record levels of free cash flow per share in the near future.

Next, we’ll cover how Amazon managed to drive cash flows to near record levels.