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Shares of Amazon are edging lower after second quarter revenue missed analyst expectations. And the company, more importantly here, is coming out with the third quarter forecast that missed estimates as well here. Um, joining us now to discuss further is Nick Jones, Citizens JP Equity Research analyst. Nick, thank you so much for joining us. First of all, just give me sort of your first blush, big picture reaction to these Amazon numbers.

Yeah, big picture, um, it was great to see AWS outperform. Um, you know, little weakness on the top line, uh, margin line. Really the guidance, um, came in a little bit of a surprise given the AWS strength. So really the focus on the call is going to be what are the inputs to the 3Q guide. Um, I think investors are also looking for, uh, better kind of operating income margin guidance than we got. Um, so that's kind of my first blush when I, when I look at the, uh, results. But overall, you know, I think the results are down the fairway and really need to focus on what the inputs to the guide are.

Nick, I, I know we're still waiting for the call, but I'm curious when you do look through that report, I mean, do you have any idea what the inputs could be here? Was there anything that sort of caught your eye as a, a point of caution in terms of what would have brought that guidance a little bit lower than expected?

Yeah, international actually looks a little bit weaker. You know, in the, in the press release, they called out a record prime day. You know, we've heard some from Etsy and eBay that there was some weakness in Europe related to elections, Euro Cup, you got the Olympics going on. So there could be some distraction in different allocations of people's discretionary spend right now. Um, but international was a little weaker on the quarter, so that could be part of the inputs into the guidance. Now, we've been hearing this narrative of folks really looking for steep discounts and being a lot more discerning with how they're going to spend their money, which probably is why probably such a great day is people are looking for steep discounts. Um, so I, I, my inkling is that it's more on the retail side more so, uh, than AWS.

And um, you know, as you, as you look at that too, and as I look at the, at the quarters, um, forecast, it seems as though, yes, sales guidance is light, but looks like the, the gap is bigger between expectations for operating income and, um, and the operating income forecast here. So, um, does that mean, you know, we know that Amazon likes to sort of reinvest in the business at different points in time. It pulls that lever. Is that what's going on here? Are we seeing some investments in the business?

Yeah, I think so. Amazon still got global expansion opportunities. They continuously want to deliver things faster and faster. It's a really unique company too, when you think about their advertising opportunity in combination with the retail, you know, they're able to advertise at the top of the funnel, um, kind of winning hearts and minds for, for brands, and they took it all the way down into the e-commerce platform, um, execute the transaction, and then ultimately fulfill it to the end user. That's a really unique platform from an advertising perspective, uh, tied right into retail, and then they're really strong cloud business. So, uh, while this company's massive today, um, it's still very much in growth mode.

And Nick, I'm curious from an AI perspective here. We, we can't go the whole interview without us mentioning AI, right? I have to bring it up, but of course it's going to come up on the call, right? And Amazon spending there, how are you sort of assessing how much they are spending toward AI right now? And when that is going to be contributing revenues, if it's already contributing revenues? Like where is Amazon in that part of the story? And are you sort of comfortable with how much they're spending versus how much they're expecting to see come back within revenue?

Yeah, it's a great question. They've already called out AI being a multi-billion dollar business. I think the AI investment cycle, and you're hearing from a lot of large players, is you really need to kind of, it's better to overinvest than to underinvest. This is a very long-term opportunity, um, that'll infiltrate, you know, efficiencies, it'll start facing consumers, um, it'll infiltrate advertising. So I think, um, you know, I'm in the camp that spending more is better than spending less, again, given that this is still a, a growthy story here. Um, we expect them to continue winning their share. I mean, really to win an AI, you need huge data sets, you need compute power, you need talent, and you need a lot of money. Um, Amazon has all of those, so I expect them to, to continue to, to be, um, competitive.

Nick, thanks a lot for your perspective. Appreciate it.