Amazon CEO Andy Jassy has released Amazon's 2023 shareholder letter.
In his shareholder letter, Jia Xi summarized Amazon's overall performance and development of various businesses in 2023. He stated that Amazon has made meaningful progress in financial indicators and the customer experience of the entire business is constantly improving.
In 2023, Amazon's total revenue increased by 12% year-on-year, from $514 billion to $575 billion. By market segmentation, revenue in North America increased by 12% year-on-year, from $316 billion to $353 billion; International revenue increased by 11% year-on-year, from 118 billion US dollars to 131 billion US dollars; AWS cloud service revenue increased by 13% year-on-year, from $80 billion to $91 billion.
While operating profits and free cash flow have improved, Amazon's e-commerce business and AWS business have also made positive progress. In terms of e-commerce business, several well-known high-end brands such as Kouchi and Victoria's Secret entered Amazon last year; In the AWS business, Amazon has released the general-purpose CPU chip Graviton 4 and the AI chip AWS Training 2.
Although 2023 is a very strong year for Amazon's growth, Jassy stated that Amazon will continue to reduce service costs in 2024 and has identified areas to further reduce costs while delivering faster to customers. Therefore, he optimistically believes that the company still has more room for growth.
The following is the full text of Andy Jesse's shareholder letter:
Dear shareholders
Last year at this time, I shared my passion and optimism for Amazon's future. And today, I have more to say. The reasons are multifaceted, starting with the progress we have made in financial performance and customer experience, and then extending to our continuous innovation and extraordinary opportunities before us.
In 2023, Amazon's total revenue increased by 12% year-on-year, from $514 billion to $575 billion. By market segmentation, revenue in North America increased by 12% year-on-year, from $316 billion to $353 billion; International revenue increased by 11% year-on-year, from 118 billion US dollars to 131 billion US dollars; AWS cloud service revenue increased by 13% year-on-year, from $80 billion to $91 billion.
In addition, Amazon's operating profit and free cash flow have significantly improved. The operating profit in 2023 increased by 201% year-on-year, from $12.2 billion (operating profit margin of 2.4%) to $36.9 billion (operating profit margin of 6.4%). The adjusted free cash flow increased by $48.3 billion, from $-12.8 billion in 2022 to $35.5 billion.
Although we have made meaningful progress in financial indicators, what makes us most happy is that the customer experience of our entire business is constantly improving.
In our store business, customers have responded warmly to our relentless attention to product selection, pricing, and convenience. We continue to have the widest range of retail options, with hundreds of millions of products to choose from, with an increase of tens of millions in just last year. Several high-end brands have started selling on Amazon (such as Corolla, Victoria's Secret, Pit Viper, Martha Stewart, Clinique, Lancome, and Urban Decay).
Being shrewd in pricing is always important, especially in an uncertain economy where consumers are cautious about their expenses. Therefore, in the fourth quarter of 2023, we kicked off the holiday season with Prime Big Deal Days, an exclusive event organized by Prime members to start holiday shopping early. Following closely behind are our extended "Black Friday" and "Online Monday" holiday shopping activities, which are open to all customers and have become our largest revenue generating event in history. Throughout 2023, customers saved nearly $24 billion through millions of transactions and coupons, an increase of nearly 70% from the previous year.
We have also continuously improved delivery speed, breaking multiple company records. In 2023, Amazon delivered goods to Prime members at the fastest speed in history, with over 7 billion items arriving on the same day or the next day, including over 4 billion in the United States and over 2 billion in Europe. In the United States, this result is mainly attributed to two factors. One benefit of regionalization is that we have redesigned the network to store products closer to customers. The second is the expansion of daily delivery facilities. In 2023, we increased the number of items delivered on the same day or overnight by nearly 70% year-on-year. As we deliver products to customers at such a fast pace, they are choosing Amazon more frequently to meet their shopping needs. We have also seen its benefits in multiple areas, including the rapid growth of our daily necessities business (with a year-on-year growth of over 20% in the fourth quarter of 2023).
Our regionalization efforts have also shortened transportation distances, helping to reduce our service costs. In 2023, we reduced unit service costs globally for the first time since 2018. In the United States alone, unit service costs have decreased by over $0.45. Reducing service costs allows us to invest in improving speed while also offering more options at a lower average selling price (ASP). More choices and lower prices make us consider purchasing more products.
Looking ahead to 2024 (and beyond), we have not yet completed the work of reducing service costs. We challenged every conservative belief in our fulfillment network and reassessed every aspect, identifying several areas where we believe we can further reduce costs while delivering faster to our customers. Our inbound fulfillment architecture and the resulting inventory placement are the key areas for 2024. We optimistically believe that there is still more room for improvement.
In the international market, we enjoy the development trajectory of our traditional markets and have seen meaningful progress in our emerging regions such as India, Brazil, Australia, Mexico, the Middle East, Africa, etc. As they continue to expand their choices and features, and move towards profitability (in the fourth quarter of 2023, Mexico became our latest international market for profitable store operations). We firmly believe that in the long run, these new geographical locations will continue to grow and achieve profitability.
In addition to its store business, Amazon's advertising growth remains strong, with revenue increasing from $38 billion in 2022 to $47 billion in 2023, a year-on-year increase of 24%, mainly driven by our sponsored advertising. We have added Sponsored TV to this service, which is a self-service solution for brand creation events that can appear on over 30 streaming TV services, including Amazon Freeve and Twitch, without minimum cost requirements.
Recently, we have expanded our streaming TV advertising by introducing advertisements in Prime Video programs and movies. Among our most popular entertainment products, including popular movies and programs, award-winning Amazon MGM original works, and live sports events like Thursday Rugby Night, the brand can reach over 200 million monthly viewers. Our streaming TV advertising has grown rapidly and started strongly.
Let's talk about AWS again. We have seen significant cost optimization since 2023, with most companies attempting to save money in an uncertain economy. This optimization largely benefits from AWS helping customers use the cloud more efficiently and leverage more powerful and cost-effective AWS features such as Graviton chips, S3 intelligent layering, and savings programs. This job reduces short-term income, but it is the best for customers and has also been welcomed. In the long run, it should be a good omen for customers and AWS. By the end of 2023, we will see a reduction in cost optimization, an acceleration in new transactions, and customers renewing their contracts with greater commitments for a longer period of time, leading to another growth in cloud migration.
The past year has also been an important delivery year for AWS. We have announced our next-generation general-purpose CPU chip, which has improved computing performance by 30% and memory bandwidth by 75% compared to the previous generation. We have also released the AWS Traineum2 chip, which has increased the speed of training generative AI applications by three times and has a memory capacity three times that of Traineum1. We continue to expand our AWS infrastructure footprint, currently offering 105 available zones in 33 geographical regions worldwide, and will have 6 new zones (Malaysia, Mexico, New Zealand, Kingdom of Saudi Arabia, Thailand, and the second German region Berlin). In terms of generative AI, we have added dozens of features to Amazon SageMaker to make it easier for developers to build new foundational models (FM). We have invented and delivered a new service (Amazon Bedock) that allows companies to leverage existing FM to build generative AI applications. Moreover, we have launched the most powerful coding assistant on Amazon Q. Customers are excited about these features, and we see that our generative AI products have significant appeal.
We have also made progress in many new business investments that may be of significant importance to our customers and Amazon's long-term development. Speaking of two of them:
We are increasingly convinced that Prime Video itself can become a huge and profitable business. This confidence is inspired by the continuous development of engaging exclusive content (such as Thursday Rugby Night, Lord of the Rings, Explorer, Youth, Castle, Road Home, etc.), the participation of Prime Video customers in these content, the growth of our marketplace programs (through our third-party channel programs, as well as various programs and movies rented or purchased by customers), and the addition of advertisements in Prime Video.
Last October, we achieved an important milestone in the commercialization of the Project Kuiper satellite Internet project: we launched two end-to-end prototype satellites into space, and successfully verified all key systems and subsystems. It is rare for us to make such achievements in the first launch. Kuiper is our low Earth orbit satellite program aimed at providing broadband connectivity to 400-500 million households currently without broadband connectivity (as well as governments and businesses seeking better connectivity and performance in more remote areas), which is a significant revenue opportunity for Amazon. We are launching our first official satellite as planned in 2024. We still have a long way to go, but our progress has inspired us.
Overall, 2023 has been a strong year, and I am grateful to our collective team for providing services to our clients. These results represent many of Amazon's inventions, collaborations, discipline, execution, and reimaginations. However, I believe that everyone at Amazon believes that in every aspect of our business, we still have a long way to go before we exhaust all our efforts to make our customers' lives better and easier. Every business we invest in has a considerable upward space.