Dear shareholders

In the 25 years that I have worked at Amazon, many stories, emails and letters were written for customers and employees. This is my first year as Amazon’s CEO and I am writing the annual shareholder letter. These letters were written by Jeff, so I’m going to try my best to make them worthwhile.

Few people imagined that the pandemic would become as widespread and long-lasting as it has. Amazon was a major player in this world, but it became even more important as physical stores were closed for extended periods and many people remained at home. This was a huge change for the world. Hundreds of millions relied upon Amazon for food, PPE and clothing. Both governments and businesses had to make a shift from working in-person with their colleagues or using technology on-premises to work remotely almost immediately. AWS was a key factor in this ability to maintain business continuity. Companies experienced extraordinary demand spikes or decreased demand quickly due to reduced external consumption. The flexibility of AWS to rapidly scale capacity and the unusually wide functionality enabled millions to adapt to these challenging circumstances.

There have been different demands for AWS services and consumer businesses during this pandemic. In the first year of the pandemic, AWS revenue continued to grow at a rapid clip—30% year over year (“YoY”) in 2020 on a $35 billion annual revenue base in 2019—but slower than the 37% YoY growth in 2019. The uncertainty, slowing demand and low revenue of many businesses explains this growth. However, it was slower than the 37% YoY growth in 2019. In parallel, many companies took a step back to determine what they needed to do after the outbreak. Many realized that managing technology infrastructure was too difficult and they decided to go to the cloud. AWS revenue growth was accelerated by this shift, along with the recovery of the economy.

Our Consumer revenue increased dramatically in 2020. Amazon’s North America-based and International Consumer revenues grew 39% YoY in 2020 due to the $245 Billion 2019 revenue base. The extraordinary growth also extended into 2021 where revenue increased 43% YoY for Q1 2021. These numbers are amazing. In just 15 months, we achieved the same growth as three years.

The world opened again in the second quarter of 2021 and people started to travel and shop more. Consumer spending began to spread across many entities. Although we weren’t certain what the future holds, the fact that our growth rates continued at double-digit levels (with a 2-year Consumer compounded annually growth rate of 29%) was encouraging. Customers appreciated Amazon’s role in the pandemic and began using Amazon to make more of their household purchase.

The growth created cost and logistics challenges as well as short-term logistical problems. Amazon spent the first 25 years of its existence building an extensive fulfillment network. We then needed to increase that number in order to keep up with customer demand. We were adding new capacities online as the labor market got tighter, which made it more difficult for us to obtain all the inventory that our sellers and vendors requested and place the inventory close to our customers. This was combined with the fact that trucking, ocean and air capacity became scarcer and more costly, which resulted in increased transportation costs and productivity. The disruption of supply chains was unprecedented. As 2021 came to an end, we expected the COVID-19’s major effect to recede. But then, in December, the omicron erupted, with global ramifications that included a reduction in people’s abilities to work. With Russia’s invasion in Ukraine, late February saw fuel prices and inflation rise to new heights.

The year 2021 proved to be unpredictable and wild, continuing the trend of 2020. I was proud to see the amazing effort of our people around the world. We wouldn’t have survived the pandemic without our dedicated and exceptional efforts during that time, for which I will be forever grateful.

A company as large as Amazon is unlikely to have the resources to handle a situation as unpredictable and discontinuous as this pandemic. Is it Amazon’s unique ability to make this possible? Because we didn’t begin from a blank slate. Since nearly 20 years, we had been improving and refining our fulfillment abilities. We are constantly innovating and trying new things with every company we work for. Customers are our most important asset. These customer experiences are always better. We strive every day to improve the lives of our customers. It is easy to see the value in this mission: customers never want to stop asking for more. Our job is to both listen and envision what is possible, then we can create it.

People often assume that the game-changing inventions they admire just pop out of somebody’s head, a light bulb goes off, a team executes to that idea, and presto—you have a new invention that’s a breakaway success for a long time. It’s rare, if not impossible, for this to happen. Amazon, like many other companies, is known for being innovative. They are constantly debating and refining their ideas, tweaking, iterating and trying new things to make the big idea resonate with customers.

Here are some Amazon examples.

Our Fulfillment Network: Going back to the pandemic, there’s no way we could have started working on our fulfillment network in March 2020 and satisfied anything close to what our customers needed. For 20 years we’d innovated in our fulfillment system, trying to speed up the process of getting items to customers. We used to take 18 hours on average to ship an item from fulfillment centers to the correct truck and then get it through the shipping lines. Today, we have two. We spent many years creating a large number of fulfillment centers and a significant logistics and transport capability. In order to deliver shipments as quickly and efficiently as possible for Amazon Prime members who expect shipments within a few days, we also reorganized how our facilities operate. In 2004, there were seven fulfillment centers within the U.S., four elsewhere in the world and no delivery stations. These are the connections between fulfillment and sortation centers and the delivery vans that you drive around your neighbourhood. We had 253 fulfillment centres, 110 sortation center, 467 delivery stations and 467 stations in North America. There were also 157 fulfillment centers and 58 sortation stations, as well as 588 delivery stations around the world. More than 260,000 delivery trucks were added to our network worldwide. We also have more than 100 Amazon Air cargo aircraft. In the past decade and half, this has been a significant capital investment at over $100 billion. There have also been countless small process and improvement improvements made by more than a million Amazonians.

Ironically, right before COVID began, we had made the decision over many years to spend billions more incrementally to increase our Prime shipments per day. This effort was delayed by the effects of the pandemic. However, we have now refocused. It’s difficult (especially when you consider the number of products we sell) to ship large volumes of merchandise in one go. Also, it can be expensive while we set up the infrastructure necessary for this. This will appeal to our Prime customers who, at over 200 million, know that quicker is almost always more. The ability to send millions of packages within days and sometimes hours was not achieved by one person. The ability to ship millions of items within a few days has taken a lot of work. We put ourselves in customers’ shoes, listened to their needs, organized Amazonians to come up with better solutions and invested a significant amount of people and financial resources for 20 years. Sometimes, we knew when the payout would be. While it isn’t always finished and there are periodic highs in investment years, this type of iterative innovations leads to improved customer experience, loyalty and better returns for our shareholders.

AWS: As we were defining AWS and working backwards on the services we thought customers wanted, we kept triggering one of the biggest tensions in product development—where to draw the line on functionality in V1. One early meeting in particular—for our core compute service called Elastic Compute Cloud (“EC2”)—was scheduled for an hour, and took three, as we animatedly debated whether we could launch a compute service without an accompanying persistent block storage companion (a form of network attached storage). A persistent block store was essential to any complete computing service. But, having one would mean that it wouldn’t be ready in time for the launch of the new services. Customers wanted to be able to use a service that was useful and provided meaningful value, even before they had the full set of features they desired. It was clear that EC2 would be feature-poor at its initial launch if it wasn’t for our ability to quickly listen to customer feedback and improve upon the product. If you are able to iterate rapidly, this approach is great. However, it can be disastrous for those who cannot. EC2 launched with only one instance in 2006. It was located in one area of the globe, using Linux OS instances (no Windows), and without load balancing, monitoring, auto-scaling or persistent storage. EC2 started out as a success but was not able to grow into the multi-billion-dollar business it is today. We added all the capabilities mentioned above and more.

AWS was still in its early stages and people often asked us about why computation wasn’t an identical commodity. There’s more to computing than just servers. Customers desire different flavors of computation (e.g. Configurations of server optimized for storage, memory and high-performance computation, graphics rendering, machinelearning, etc. Fixed instance sizes can be portable containers or serverless, with a variety of optimizations for persistent storage and many other networking abilities. There’s also the CPU chip, which runs on your computer. The industry has used AMDx86 or Intel processors for many years. Although we have strong partnerships with these companies we soon realized that we would need to make our chips in order to improve price and performance as customers asked. Graviton was our first generalized chip, and it was announced in 2018. It enabled a small number of customers to run their workloads more efficiently than with other options. It wasn’t until 2020 that our Graviton2 chips made a significant impact. They offer up to 40% more price-performance than comparable x86 processors. Imagine how significant a 40% increase in compute power is. Computing is used in every aspect of technology. This is a significant deal for customers. Graviton2 is a huge success so far. 48 of top 50 AWS EC2 users have adopted it. However, the AWS Chips team had already learned from customers and released Graviton3 in December. This version offers a 25% increase over Graviton2. It’s amazing to see the list of things we have created and delivered to customers in EC2 and AWS.

Devices: Our first foray into devices was the Kindle, released in 2007. It was not the most sophisticated industrial design (it was creamy white in color and the corners were uncomfortable for some people to hold), but revolutionary because it offered customers the ability to download any of over 90,000 books (now millions) in 60 seconds—and we got better and faster at building attractive designs. Soon after, we released a tablet and then a smartphone. This phone featured front-facing cameras as well a gyroscope that gives customers both dynamic 3D views and dynamic perspectives. Although the phone failed, we redirected these resources to other areas. We hired some amazing long-term developers and gained valuable lessons that will be useful in future devices, such as Echo or FireTV.

When I think of the first Echo device—and what Alexa could do for customers at that point—it was noteworthy, yet so much less capable than what’s possible today. Today, there are hundreds of millions of Alexa-enabled devices out there (in homes, offices, cars, hotel rooms, Amazon Echo devices, and third-party manufacturer devices); you can listen to music—or watch videos now; you can control your lights and home automation; you can create routines like “Start My Day” where Alexa tells you the weather, your estimated commute time based on current traffic, then plays the news; you can easily order retail items on Amazon; you can get general or customized news, updates on sporting events and related stats—and we’re still quite early with respect to what Alexa and Alexa-related devices will do for customers. Alexa is to become the best personal assistant and most resourceful in the world. We hope that it will make people’s lives better and more enjoyable. While we still have lots of inventing to do, our customers are proving that we’re moving on the right road. We also have several devices that are in different stages of their evolution, such as the Kindle FireTV and Echo. Ring and Blink are the most trusted digital home security products, Astro was just released in 2021. However, it is safe to say all of our devices, including Kindle, FireTV/Echo Alexa/Echo Ring, Blink, Blink, Astro, etc., is still an invention-in progress that will continue improving people’s lives.

Prime Video: We started in 2006 with an offering called Amazon Unbox where customers could download about a thousand movies from major studios. Because bandwidth in those days was much slower, it took about an hour for a video to be downloaded. With the introduction of connected TVs and faster bandwidth to homes and other devices, streaming became a better solution for customers. We focused all our efforts to stream. We began offering more than 5,000 movies and TV shows to customers who subscribed to Amazon Prime in 2011. All of our content had been produced initially by entertainment and studio companies. The deals we had were costly, specific to each country, and limited in our ability to access them for long periods. We started our own programs to broaden our choices. Our first attempts included shows that were short-lived like Alpha House and Betas, before we had our first award-winning series in Transparent, eventually created multi-year franchises in The Marvelous Mrs. Maisel, The Boys, BoschAnd Jack Ryan. Through this process, we have learned a lot about how to produce compelling entertainment that has memorable moments. We also use machine learning, other creative technology, and provide a premium-quality streaming experience with useful data (with relevant, helpful, and timely data about actors, movies and sports stats a mouse click away via our unique Xray feature). This technology may be seen in action on our new show, “The Hit Series”. ReacherIt is possible that you will see it at our Lord of the Rings series launch, which takes place Labor Day in 2022). This iterative invention will also be seen when we launch, according to us. Thursday Night FootballThe NFL’s premiere weekly prime-time, streaming-only broadcast will air exclusively on Prime Video beginning in September 2022. This agreement is valid for eleven years. Over the following years we will be working tirelessly to improve the NFL viewing experience.

Prime Video Channels has a track record of inventing frequently. This is why many major entertainment companies are now Prime Video Channels partners. Channels allows entertainment companies to use Prime Video’s technology and view experience. It also gives them the opportunity to offer subscriptions for their content. Warner Bros. Companies like Warner Bros. have discovered that Channels are driving significant incremental membership growth and providing better customer service. While there is so much progress in Prime Video from where we started, we have more invention in front of us in the next 15 years than the last 15—and our team is passionately committed to providing customers with the most expansive collection of compelling content anywhere in the world.

Iterative innovation is also possible for community and individual support. Two new leadership principles were added last summer: Try to be the Best Employer on Earth and Success Scale Bring Broad Responsibility. These concepts were always implicit at Amazon, but explicit Leadership Principles help us ask ourselves—and empower more Amazonians at all levels to ask—whether we’re living up to these principles.

More than 1 million Amazonians are employed in our fulfillment network. The $15 minimum wage was a campaign we supported in 2018. It is now more than twice as high as the federal minimum. We have not stopped pushing for it. Our average hourly starting salary now exceeds $18. We offer very strong benefits. These include full healthcare insurance, a full 401K plan and up to 20 weeks parental leave. Associate who wish to pursue college degrees can also get full tuition coverage. Our employees’ lives are still improving. Our team has created a list of the 100 most common pain points that employees experience and is working hard to fix them. The safety of our fulfillment network is also a passion. Our focus is on decreasing strains, sprains/falls, repetitive stress injury, and other injuries. Sometimes, our injury rates can be misunderstood. Operations jobs can be classified as both courier and delivery and warehousing. Our recordable incidents rates in the U.S. Public Numbers were slightly higher than our peers in warehousing (6.4 vs. 5.5) and lower than our peers in courier and delivery (7.6vs. 9.1). We are about average in comparison to our peers but don’t aim to be. Our goal is to be the best in our class. My first day in this new job, I was able to spend a lot of time with the safety and fulfillment teams. I hoped that there would be an easy way to change the numbers. This was not what I found. It takes rigor, problem solving, analysis and the willingness to create to reach your goals at this scale. Every step in the process has been analyzed to see where we could improve. A variety of programs are available in flight. We have a variety of programs in flight (e.g. But, we still have a ways to go, and we’ll approach it like we do other customer experiences—we’ll keep learning, inventing, and iterating until we have more transformational results. We’ll never be satisfied until that happens.

Similar to our size, we also have a large carbon footprint. We created The Climate Pledge, a commitment to net-zero emissions by 2040. This pledge is ten years ahead the Paris Agreement. We’re making significant progress on this effort (we’re committed to powering our operations with 100% renewable energy by 2025—five years ahead of our original target of 2030, we have ordered over 100,000 electric vans to deliver packages, and have over 300 companies who’ve joined us in The Climate Pledge). Our operations, which include shipping billions in packages each year, present us with a challenge that is different from most businesses. While we’re determined to meet the challenge, this will not be easy.

Also, we are working to improve the availability of affordable housing within the areas where our large presence is. We have already committed $1.2 Billion to affordable housing programs in Washington State’s Puget Sound, Arlington (Virginia), Nashville (Tennessee) regions since the launch of our more than 2 billion Housing Equity Fund a year earlier.

Kuiper is our satellite network on low earth orbit that will cost us more than $10 billion over the next few years. Kuiper will provide broadband access for customers who have little or no fixed internet connectivity. This will allow them to change their lives and make it more accessible to many people (analysts believe that between 300-400m customers worldwide fall within this group). We’re optimistic that there is a pretty good business model for us too, but we’ll see—and it’s a real game changer for underserved families and businesses that will unfold over many years as we keep evolving its capabilities.
 
 
Iterative innovation is a hallmark of every Amazon team. You could give similar examples for Advertising, Grocery or Gaming, Amazon Music and Amazon Care (our telemedicine service), Pharmacy, etc. We continue to learn and experiment with new ways to improve the customer experience every day.

It sounds great, but the natural question that arises is: What’s it like to be successful at this? While it can be difficult to master, these are the components that we have found helpful:

1/ Find the right buildersThe indexing of hiring builders is high. As builders, we see them as individuals who are interested in creating, looking at customer experiences to identify what isn’t working well and trying to make it better. People who are always asking “Why can’t it happen?” People who love to experiment, tinker and realize that launch is only the beginning, not the end, are what we want.

2/ Build teams of builders that can be as separate and autonomous as possible: Customers are often concerned in many different areas, so it’s difficult for customers to get deep insights from teams. If there are resource conflicts with more established businesses it is difficult for teams to dedicate enough time to new initiatives. In these cases, the safer bets often win. One-task teams are more likely to know the needs of their customers better and will spend most of their time inventing.

3/ Allow teams to be flexible and move fast by giving them the tools they need.Speed can’t be predicted. This is a choice made by leaders. While there are some trade-offs to this approach, you cannot wake up every day and suddenly move quickly. You need the tools and resources to be able to quickly experiment with new technologies. This is why AWS was created. It also allows teams to decide on two-way doors and sets expectations that speed does matter. It does. Every business, at any stage in its development, is dependent on speed. People who move faster than their competitors fall behind over the years.

4/ Blind Faith is necessary, but not false hopeThis is the lyrics from my Foo Fighters song “Congregation”. Inventing is a creative process that results in new ideas people reject. This is where blind faith comes into play. However, it’s important to take a step back and ensure that you’ve created a plan that will resonate with customers. Lucky for us, we have builder friends who are willing to challenge one another, feedback loops which allow us to get customer feedback, and an iterative product development process that requires us to work backwards towards the customer. We have to create a Press Release to explain the benefits to the customer and then a Frequently Asked Question document to describe how we would build it. It helps us not have false hopes, at least, but blind faith.

5/ Define the Minimum Loving Product (MLP) and be open to iterating quicklyOne of the hardest decisions that teams have to make is where do you draw the line? Too many bells and whistles are often added to the launch process by teams that wait too long. This can lead to them missing the chance for a first-mover advantage, or to gain mindshare in rapidly-moving markets before their well-executed counterparts. It must be a good product from the start. This is why we refer to it as a Minimum Loveable Product vs. a Minimum Viable Product. However, in smaller market segments it can be more beneficial for teams to get this MLP out quickly and then iterate rapidly.

6/ Adopting a long-term orientationAmazon is sometimes criticised for not closing down too much. Amazon has a higher tolerance for investments than other companies. However, transformational innovations take many years. You have to stay in the game if your investments are going to make a significant impact on customers and company experience.

7/ Do not be afraid to failThe truth is that you’ll fail more often if you create a lot. It’s not something that people like, but this is part of the process. When it’s clear that we’ve launched something that won’t work, we make sure we’ve learned from what didn’t go well, and secure great landing places for team members who delivered well—or your best people will hesitate to work on new initiatives.
 
 
Albert Einstein was often credited for describing compound interest, the eighth wonder of all time. “He who does not understand it, earns it.” Iterative innovation is a concept we share. Customers are able to experience magic through iterative innovation. Customers’ experience is enhanced by constant innovation.

If you want to compound your profits, then time is your friend. Amazon is an established company that has large business, but we are still very early in our journey. We will continue to be insurgent—inventing in businesses that we’re in, in new businesses that we’ve yet to launch, and in new ideas that we haven’t even imagined yet. It is Day 1.

Sincerely,

Andy Jassy
The President and Chief Executive Officer
Amazon.com, Inc.

P.S. We have reproduced our 1997 Shareholder Letter as always. It’s as accurate today as in 1997.