+ AWS continues strong YoY growth. AWS remained the fastest growing segment, recording revenue of US$20.5bn, up 27% with customers opting for lower-cost products as they revise technology spending to combat inflation and weakening business performance. AWS generated operating income of US$5.4bn, the sole contributor to the overall operating income of US$2.5bn for the quarter.
+ Advertising bucks industry trends. Advertising grew 25% YoY to US$9.5bn (7.5% of total 3Q22 revenue) while competitors faced advertising pullbacks. Amazon believes its advertising model is attractive to sellers as it operates at a point where consumers are ready to spend, which increases its effectiveness.
– 4Q22 revenue guidance below our forecast. Management guided 4Q22 revenue to be between US$140bn and US$148bn, representing 2-8% growth YoY. The strengthening US dollar is expected to continue to be a major headwind going into the quarter, although FX has more impact on revenue growth than on income due to the investments Amazon has made internationally. AWS growth slowed to the mid-20% towards the end of 3Q22 and this is expected to persist throughout 4Q22.